steil3_Maureen FischingerGetty Images_dollartorn Maureen Fischinger/Getty Images

The Real Cost of De-Dollarization

Despite its current challenges, the US dollar’s status as the world’s main reserve currency remains integral to the multilateral trade system as we know it. While there are currently no viable alternatives that could usurp the greenback, the biggest threat to its hegemony comes from the US government itself.

NEW YORK – At the end of World War II, the United States accounted for more than half the world’s economic output and gold reserves. The United Kingdom was effectively bankrupt, with the remnants of the sterling area bound together by capital and trade controls. Once the British pound became convertible in July 1947, owing to US insistence, it succumbed to overwhelming selling pressure. The dollar, which was pegged to gold at $35 an ounce, was buoyed by America’s privileged position within the newly formed International Monetary Fund and quickly established itself as the bedrock of global trade and finance.