Dollar hegemony isn’t foreordained. For years, analysts have warned that China and other powers might decide to abandon the dollar and diversify their currency reserves for economic or strategic reasons. To date, there is little reason to think that global demand for dollars is drying up. But there is another way the United States could lose its status as issuer of the world’s dominant reserve currency: it could voluntarily abandon dollar hegemony because the domestic economic and political costs have grown too high.
Dollar hegemony is a topic that doesn’t get much press. It was Henry C.K. Liu of Asia Times Online whose verbose explanations of the topic were my introduction to the concept. It explains a great deal of why the U.S. has gotten away with much of what it has with its swelling debt and incompetent governance.
Americans aren’t much for renouncing anything, and certainly not something as central to its own centrality in world affairs as dollar hegemony. But with ballooning debt, unravelling rule of law (that’s what these protests are all about) and the other woes we face these days, it could end unceremoniously when the rest of the world decides, as my old boss in Lay Ministries used to joke, we don’t know what we’ll do without you, but starting Monday morning we’re going to find out.