The Biggest Threat to Dollar Dominance...

The Biggest Threat to Dollar Dominance Isn’t What You Think

Phillip Patrick

Over the last year and a half, we’ve been watching the global dedollarization trend very closely. Peter Reagan has written about the BRICS nations’ R5 currency project, and we’ve seen Saudi Arabia dismantle the petrodollar pact. A growing number of nations are signing bilateral trade agreements for international trade in local currencies (effectively bypassing the dollar as an intermediate currency).

Now, there are many reasons for dedollarization, both political and economic. We’ve covered them before.

And it turns out the biggest danger to the dollar probably isn’t Russia or China or even the BRICS alliance…

Recently, two heavyweight economists weighed in on the dollar’s waning global reserve status. Steven Kamin, a former director of the Fed’s Division of International Finance, and Mark Sobel, a former Treasury Department economist, collaborated on a report that clearly identifies the threat.

Kamin and Sobel acknowledge the global dedollarization efforts I outlined above.

They do not think the BRICS nations or bilateral trade agreements are the biggest threat.

Rather, the biggest threat to dollar dominance is the U.S. itself. Well, specifically, the federal government. Turns out you can’t run up $6 trillion in debt in three years without consequences…

Kamin and Sobel warned any “severe deterioration” in the U.S. financial and economic situation could be enough to destroy the dollar as a viable global currency. And that severe deterioration is extremely likely, thanks to the massive government debt.

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