The dollars dominance is eroding now – any further decline will lead to a global reckoning

The US dollar has been the dominant global reserve currency for decades and during this time, plenty of competitors have emerged and vanquished. Also, it’s a fact, the dominance of dollar has been so widespread that a considerable number of individuals had never contemplated the possible outcomes of forsaking it in favor of an alternative. However, recent developments in international order might suggest that the US dollar’s position is precarious this time. Considering his concerns over eroding away of US dollar’s dominance, Fareed Zakaria, political commentator, in a recent episode of his show on CNN said, “If the US dollar’s global supremacy erodes, America will face a reckoning like none before”. In such circumstances, the recent developments in the international system do insinuate a threat to the greenback, however, it engenders many questions as well. One inevitable question that could not be set aside is: what these developments would mean to global capitalism? Historically, the United States’ dollar has been ruling the financial world since the culmination of World War II and with the subsequent inception of the in the mid-1940s as an effort to stabilize the international monetary system. This system created a collective international currency exchange regime pegged to the U.S. dollar which was, in turn, pegged to the price of gold. However, this Bretton Woods system collapsed due to the increasing competitiveness of European and Japanese exports with the US exports, meaning it was importing more than it was exporting. This, coupled with rising inflation and a decrease in US gold reserves, put further pressure on the dollar’s peg to gold. Consequently, In 1971, President Nixon announced his new economic policy, “”, which ceased the direct convertibility of U.S. dollars to gold that ended both the gold standard and the limit on the amount of currency that could be printed. In spite of this event, the dollar remained the world’s reserve currency or maybe there existed no viable reserve-currency alternatives at that time. However, the situation might seem different today as many nations – Russia, China, Iran, India, Brazil, Argentina, and Saudi Arabia – have accelerated efforts in recent months toward arrangements to reduce their dependence on the dollar. Recently, the Russian president has endorsed “yuan” as the currency of choice at the three-day summit of Chinese president, Xi Jinping. In his talks, Putin said, “We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa and Latin America”. Apart from this, speculations are being made that the BRICS might come up with “” as a better alternative reserve currency which would be pegged to the value of gold. There could be several reasons behind these clumsy moves, however, one reason that couldn’t be shunned is the Ukrainian war. According to political economists and sanctions analysts, the United States’ dominance over the global financial system and its ability to it, raises concerns for other nations that the US could anytime use the power of its currency to target them the way it has sanctioned Russia. This maneuvers them to abridge their dependence on the dollar and subsequently, propels them to test other alternatives to reduce the dollar’s hegemony.