The dominance of the USD. Good or bad?

The impact of the USD from then to now

After the First World War, America has become the biggest economic powerhouse over the globe. The USD has also gradually replaced the pound to become a widely circulated currency around the world. In 1944, the position of the USD was further consolidated when 44 countries signed the Bretton Woods Agreement. Until now, although there have been signs of the USD losing its purchasing power in the international market, the USD is still an ‘enormous guy’ when talking about international currencies.

The response of other nations

Being concerned about the expanding power of the USD in the international financial system, many nations are afraid that America and some European countries will weaponize it. In 2022, they used the USD as a punishment on Russia for the war between Russia and Ukraine. Some countries including China and Moscow, Russia and Iran, the UAE and India, etc started to collaborate with each other to unify a trading currency that will limit their dependence on the USD. As a result of this strategy, it was actually effective. Furthermore, some currencies even experienced a stunning increase in their value in the trading market.

Should we let the USD be replaced?

Nowadays, many countries are looking forward to the independence from the USD. However, it is unlikely to say that the USD will lose its top position in the financial system in the near future. 

Moreover, the topic of whether we should replace the USD or not is still controversial and ambiguous. Many politicians believe that they need to prevent the weaponization of this dollar and focus on scaling up their domestic currency internationally. However, unifying a single currency will reduce the complexity in the trading process among countries. If the USD were not the top choice, what would it be?

Reference:

-, N. T. (2023, April 4). Sự thống trị của đồng USD trong thương mại và đầu tư toàn cầu. Nhịp Sống    

Kinh Tế Việt Nam & Thế Giới. https://vneconomy.vn/su-thong-tri-cua-dong-usd-trong-thuong- 

mai-va-dau-tu-toan-cau.htm