Loose talk about the demise of the United States Dollar as the global reserve currency is extremely premature and frankly just silly.

Yes, yields on U.S. Treasurys may have increased since President Donald Trump’s misguided introduction of global tariffs. But make no mistake, the safe-haven assets of the global economy remain the U.S. dollar and U.S. Treasurys. 

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Yes, the dollar is trading near 3 year lows against a collective basket of international currencies. On a longer-term basis, however, the dollar is very strong. On a 20-year view, the dollar’s value has appreciated by 20% against the currencies of its major trading partners. No other currency or, for that matter, economy or political entity can rival the dollar, the U.S. economy, and the U.S. system of government with its checks and balances. The dollar is central to global finance. The dollar is involved in almost 90% of all transactions in the multitrillion-dollar foreign exchange market. The dollar is used in 80% of international transactions.

When commodities as basic as oil, copper, steel, lumber, and agricultural goods are traded between nations or businesses, the dollar is the currency of exchange for the vast majority of transactions. U.S. banks, with their formidable balance sheets and global reach, are most often the intermediary for international transactions involving not only U.S. businesses but also international businesses, even when no U.S. business is involved. 

It is ironic that President Trump rants about the U.S. trade deficit. After all, that same trade deficit provides global liquidity for international transactions, whether involving U.S. businesses or not. No other international currency is as liquid as the dollar. No other currency is as deeply embedded in the global economic system as the dollar. Frankly, no other currency comes close, not the Euro of the European Monetary Union or the Chinese currency, the Yuan. 

Over the past 25 years, as the Chinese economy has increased its share of the global economy, the U.S. economy has maintained about a 26% share of global output. But the economies of Western Europe have lost their global market share. The dynamism of the U.S. economy supports the role of the dollar as the global reserve currency. Looking out into the future, the preeminence of the U.S. technology industry and U.S. capital markets ensures that the international trading community will continue to have confidence in the dollar. 

The dollar’s status as the global reserve currency is also supported by the global community’s confidence in the U.S. legal system. U.S. courts can rely on a deep reservoir of legal decisions in order to resolve disputes involving international transactions equitably. The global community knows that U.S. courts do not reach arbitrary and capricious decisions. The U.S. Constitution and the U.S. Supreme Court also support the dollar’s status. The Constitution has endured for almost 250 years. The Supreme Court’s rulings are globally respected. Top line: U.S. institutions are strong — stronger than any one person, including a President. This is not to be taken for granted, of course, but it is an important reality.

But it is not just the current strength of the U.S. economy and the institutions of the U.S. that ensure the dollar’s status well into the future. Yes, the U.S. economy faces the challenges of the federal deficit and the current nonsense about Trump’s tariffs. Still, no other large economy possesses a future as bright as the U.S. economy.

The population of the U.S. is growing. The populations of Western Europe and China, two economic rivals, are static or falling. U.S. productivity growth is accelerating while productivity growth in Western Europe is moribund. As for China, that economy is withering at this very moment. China is experiencing deflation. This is a cancer eating away at the bedrock of the Chinese economy. China exports or its economy dies. The other nations of the world are pushing back against Chinese exports. The future of China is bleak.

IF THEY DON’T MAKE A DEAL THERE WILL BE BOMBING 

The strength of the U.S. economy, global respect for the U.S. legal system, the strength of U.S. political institutions, and the power and global reach of the U.S. military ensure that King Dollar will reign supreme for decades to come.