The devaluation of the dollar can be influenced by various factors, such as inflation, economic instability, trade imbalances, and changes in interest rates. In recent times, it could be attributed to increased government spending, rising debt levels, and global economic shifts impacting currency values.
A persistent increase in the general price level erodes the purchasing power of a currency. If the U.S. experiences higher inflation than its trading partners, the dollar’s value may decline relative to other currencies.
Uncertainty in the economic landscape, such as political instability or financial crises, can lead to a loss of confidence in a currency. Investors may seek safer alternatives, putting downward pressure on the dollar.
High levels of government debt can raise concerns about a country’s ability to meet its financial obligations. Investors may worry about the government resorting to inflationary measures, impacting the currency’s value.
Dollar dominance appeared after WW2 and all the countries in the world accepted having one global stable currency. Dollar was considered as a secure and reliable trading tool. But when you weaponize a currency only because of geopolitical crisis it decreases the trust in it.
US has over 20 countries under US sanctions. The weaponization of the US Dollar has made it a necessity for countries to develop an alternative to the Dollar. Non-Western economic powers like India, China, Iran and Saudi Arabia are actively reducing dependence on USD as we speak, but somehow this is not worth mentioning.
USD probably won’t become irrelevant in our life times. The moment when less USD will be required in the world in this moment it will start to lose its value.
Non-Western economic powers, such as China strengthen their economies and international influence, and there could be a shift towards alternative reserve currencies or a multipolar currency system. Geopolitical and economic developments will play a crucial role in determining the trajectory of the global monetary landscape.