- By Mahnoor Hasan Shigri
People have been talking about what will happen to the US dollar in a world with many powers for a long time, even though it is sometimes seen as an unstoppable giant. When the world economy is under sanctions or in trouble, people look at currency movements, central bank reserves, and power struggles between ‘big’ countries. But those are just the current ‘hot spots’ there are other trends that are slowly becoming more important. One of them, de-dollarization, is something that people want to happen, not something that happens by chance. The dollar is still the ‘most important’ part of the world economy because it makes up a ‘large’ part of trade and debt. Just the idea of instability can make markets unstable and cause panic around the world.
With a strong treasury on one side, the BRICS states on the other and the IMF firmly incharge of the world’s financial systems, the dollar is still a lifeline and even a fault line. In this case, closeness is never neutral it always has an effect. Money plays a vital role in business transactions. The value of money is ubiquitous since it is involved in any trade transaction. An extensive network of relationships reinforces its importance. An excellent example is the US dollar, which maintains close relations with countries undergoing growth and development. At the same time, it is associated with global debt operations and other Western investments. Lastly, it also correlates with the energy market. No other currency managed to accommodate itself in so ‘complicated’ relationships that, on the contrary, often contradict each other.
The dollar is a universally used medium that is a constant presence in ‘all’ markets and involved in ‘all’ trade transactions. Its special position is explained by its strategic and geographic location, which gives it certain advantages over other currencies in terms of solving specific difficulties of global trade. Its role during economic turmoil results from the combination of relationships and liquidity. The dollar continues to be the ‘only’ asset that crosses national borders. Other assets are limited to a particular country. Even Beijing can learn something from it, which is located next to London and other financial capitals. In a place where direct trade may easily be compromised by a lack of trust, the dollar gets some ‘diplomatic leverage’ for itself.
Other reasons as to why the dollar is relevant to this analysis are in its geographical location. In relation to the virtual ocean, the dollar has a strategic position. It considers the infrastructure in the case of swift and quickly places it in a macroeconomic perspective. In considering the potential value pathways and the relationships within a region. Even when the security of traditional banking becomes one of the most important pillars to consider, there are other subtle variables that can shift strategies. Even so, the dollar influences on the entire planet and not just on those countries that surround it. The impact of the dollar on global food prices has always made the developing countries’ governments worried about the impact of inflation and deflation.
Flying with high debt servicing costs, inflation and fiscal pressures make stability of the greenback both theoretical and unilaterally irrelevant. However, the move towards ‘alternative’ options should not be considered in an idealistic manner. The process of seeking ‘alternative’ monetary systems is constrained and hindered by institutional pressures and political interests, making it non-influential. In global matters, influence does not play out like a dictator that determines how things happen immediate. International relations, on the other hand, have a lot to do with relevance and not necessarily with power, although this does not mean that it is insignificant. Some cases, like the 2008 crisis, power is more a factor on the side rather than at the heart of the issue. In this sense, the dollar has positioned itself as a factor. It is no precursor of any form of manifestation in the region but simply a participant. It participates by being involved in the dynamics of the crisis and is exposed to its impacts.
However, it is not about counting in dollars. Rather it is about knowing about the world and taking actions in respect of relevance alone. Being reactive all the time will make other blocs less interesting to people. Despite all the division taking place in the global arena between countries, the American currency continues to retain its stabilizing position thanks to ‘balanced advocacy’. It is obvious that the role of the Central Bank Digital Currencies (CBDCs) will be analyzed further down the line but for now, everyone’s attention is concentrated on more classical actors. When considering the broader picture, there are some nuances that need to be addressed. Firstly, the American dollar is not just money but rather an ‘integral’ part of the international system. Secondly, in the areas where political changes occur with the same persistence as geographical features, it becomes impossible not to consider this aspect.
