Foreign exchange platform analyst: "The global status of the US dollar will plummet"

　　Forex PlatformWhile efforts by other countries to move away from the dollar are often cited as the driving force behind de-dollarisation, those concerned about the trend should see the US as the biggest culprit, two think-tank analysts wrote in a Financial Times article.

　　That is because the real threat to the dollar's international standing is the growing dysfunction of the United States, both political and fiscal, the analysts Steven B. Kamin and Mark Sobel wrote on Monday.

　　De-dollarization is a trend that has gained momentum in recent years, with the goal of reducing the world's reliance on the dollar, which is the backbone of global trade and the largest currency in the world's central bank reserves.

　　Proponents argue that de-dollarization would free external economies from the risk of U.S. sanctions and give other currencies greater influence and independence.

　　"While foreign efforts to promote this trend have attracted widespread attention, they are questionable at best," wrote Mr. Kamin and Mr. Sobel. Potential rivals to the dollar, such as the euro and the renminbi, do not have the huge advantage of being so popular.

　　"The US economy is huge, accounting for about 25 per cent of global GDP. It is more innovative, entrepreneurial and growing faster than almost any advanced economy," they said. "The US financial marekt is the deepest, most liquid and most open market in the world. The rule of law is strong and investor protections are available to residents and foreigners alike."

　　At the same time, as long as the US imposes sanctions with the support of geopolitical allies, they cannot in fact be the basis for a significant pullback in the dollar. This is the case with Russia, which lost access to the dollar after its invasion of Ukraine. Beyond calls for de-dollarisation, the impact of sanctions is limited.

　　The debate on foreign action misses the point, because dollar strength is first and foremost the result of US economic leadership - and when that status begins to crumble, the alarm of de-dollarization should begin to sound.

　　They argue that a range of factors could exacerbate this risk: domestically, including political imbalances, runaway US spending and debt, and constraints on the Fed's independence.

　　And that's only half the list. De-dollarization intensifies, protectionism rises, and the likelihood of unilateral financial sanctions rises. The threat of a weaker dollar, which would make US exports cheaper, would also be ominous.

　　"The dollar's global stature will plummet, and market chaos and volatility will erupt. This dire situation will cause tremendous damage to global prosperity, including the United States," they wrote, later adding: "If the United States fails to better maintain domestic order, the dominance of the dollar will be the least of our worries."