The Economists and Elon Musk Alarmed on US Living Standards and Dollar Weaponization

The U.S Dollar has been the world’s dominant reserve currency which means that it has been held in large quantities by governments and institutions for international trade. However, the circumstances have been changing and with countries seeking to reduce dollar dependence, there has been a growing trend of de-dollarization around the world.

KEY TAKEAWAYS

• There has been a decline in the shares of the U.S. dollars in the Global reserves.
• The weaponization of the U.S. Dollar is a major reason behind de-dollarization.
• De-dollarization can have a negative impact on the United States’ economic position.

The Economist Peter ST Onge has warned that this trend towards de-dollarization is happening way faster than people can imagine. Also, the weaponization of the U.S. Dollar could have dire consequences. Where ‘weaponization’ means the use of the U.S Dollar as a tool of foreign policy.

St Onge pointed this out by explaining how the share of global reserves held in the U.S. Dollar has been declining gradually. The amount came down from 73% in 2001 to 55% in 2021. There was a notable decline in recent years. From all of this, The economist predicts that day is not far when the U.S Dollar will be eclipsed by another currency in as little as six years.

He referred to the weaponization of the U.S. Dollar as a major reason behind de-dollarization. When the U.S Dollar will be used as a tool of foreign policy, it can lead to the countries avoiding reliance on the dollar and seeking alternatives. This could lead to soaring inflation in the U.S. and a decline in the living standards of Americans as well.

Not only did St Onge make this point but Elon Musk also weighed in on the topic of de-dollarization. He suggested that Cryptocurrency could play a huge role in reducing dollar dependence. Musk is known for supporting cryptocurrencies like Bitcoin, and Dogecoin. Not only that Tesla has millions of Dollars invested in Bitcoin. Thus it seems that Cryptocurrencies can become the future of Global currencies.

Negative Impact of Sanctions on USD

St Onge has insisted that the weaponization of the U.S Dollar has been the major reason. Behind the decline in the currency’s status as a Global reserve. He also pointed out the move of the U.S. to freeze $300 billion in the Russian central bank back in 2022. While the move was made to crash the Russian economy and cause civil unrest. Instead, it led to countries reducing their reliance on the U.S Dollar.

The warnings were mostly based on the idea that the status of the U.S Dollar as the global reserve has been a key factor in the country’s economic power. If the U.S. Dollar loses this status it could suffer significant economic and geopolitical consequences.