By Wong Kon How
After nearly 80 years of dollar dominance, the US might be in danger of losing its global reserve currency status.
The US may have the world's most powerful military, but the dollar is its greatest weapon. Compared to the world’s two largest economies. The U.S. dollar has depreciated against China Yuan by around 12% since during this period.
When the U.S. uses its dollar as an "economic weapon of mass destruction.", the recent example is Russia, freezing its $630 billion worth of forex reserves and deeply undermining the value of the ruble. That gave America the ability to punish Russia without getting US troops involved in war.
With great power comes great responsibility: When you use a weapon of mass destruction, even an economic one, people get spooked. To protect themselves from the same fate as Russia, other countries diversify their investments away from the US dollar into other currencies.
Weaponizing the dollar could lead to its debasement. The "balkanization of global financial systems" erodes America's role as the reserve currency.
Reference to CNN article published on 03 Apr 22.