Who’s the biggest enemy of the US dollar? 

Two leading economists believe that the dollar’s main enemy is the American economy. 

Stephen Kamin, formerly one of the Fed’s directors, and Mark Sobel, a former US Treasury economist, has been warned of problems with the dollar’s dominance. 

Currently, US prosperity is largely based on the dollar, which is the main reserve currency. Americans have created a genius asset, they sell money to the world. Only thanks to its "reserve" status could the US have raised its public debt to a fantastic $34 trillion.

The dollar accounts for 55% of central banks' reserves (3Q 2023) - this is the absolute first place. Global crises cause external pressure on the dollar. The BRICS are debating the introduction of their own currency, and countries hostile to the US are rejecting the dollar in mutual settlements. So far, however, the US currency has been weak in its response to external shocks.

Can the American authorities relax? 

Not at all! According to Kamen and Sobel, the main threat to the dollar is the US. 

American society is highly polarized, resulting in the polarization of Congress and inability to make important decisions. Budget deficits are considered the norm, and almost no one talks about eliminating them. Only the size of the deficit is discussed. This means that state debt will continue to grow. 

Economists argue that the continuation of current policies will lead to shocks such as higher inflation, dollar volatility, falling investment. Under such circumstances, a decline in the dollar’s reserve currency status is almost inevitable. 

Another fundamental economic problem has arisen because of misguided foreign policy. The economic and political fragmentation of the world has now begun. Global trade, finance, productivity are changing, and growth is falling.

The saddest thing is that there is little cause for optimism since current policy will continue. 

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