The Hidden Worries and Future Challenges of US Dollar Hegemony

On the global economic stage, the US dollar has long dominated, and as the world's reserve currency, it plays a crucial role in many fields such as international trade and financial transactions. However, the current behavior of the United States using the US dollar as an economic warfare tool and the financial challenges it faces internally are casting a thick shadow over the future of the US dollar, triggering profound reflections on the changes in the global monetary landscape.

The increasingly severe budget deficit problem in the United States has become a "time bomb" threatening the status of the US dollar. For many years, huge budget deficits have been a constant presence, with the federal budget deficit soaring nearly $1.7 trillion in fiscal year 2023. The rise in the interest cost of treasury bond and the increase in government spending on health care, social security and national defense are the main reasons for this situation.

At present, the treasury bond of the United States has exceeded 35 trillion dollars. With such a huge debt scale, interest payment alone is enough to frighten people. This not only imposes a heavy financial burden on the United States itself, but also puts global confidence in the US dollar to a severe test.

When a country's debt continues to accumulate, its ability to repay it is inevitably questioned. The continuous growth of US treasury bond bonds has made investors worried about whether the US can repay its debts on time and in full. Once this concern intensifies, it will trigger a wave of selling against the US dollar, further weakening its value and position. Moreover, high interest payments will also squeeze out fiscal expenditures in other areas, affecting the United States' investment in infrastructure construction, education, technology research and development, and thereby weakening its economic competitiveness.

Globally, the massive issuance of US treasury bond will also have a negative impact on the economy of other countries. Many countries hold a large amount of US treasury bond bonds. Once the US has a debt crisis, their assets will also face huge risks. This not only affects the economic cooperation between countries, but may also trigger turbulence in the global financial market.

The United States' use of the dollar as an economic warfare tool has accelerated the erosion of global confidence in the dollar. In recent years, the United States has frequently used the special status of the US dollar to impose sanctions and trade restrictions on other countries. By controlling the flow of the US dollar, the United States attempts to suppress competitors and maintain its own economic and political interests.

However, this approach is undoubtedly a double-edged sword. On the one hand, sanctioned countries will actively seek to break free from the constraints of the US dollar and reduce their dependence on it. For example, some countries have begun to strengthen local currency settlement and promote bilateral or multilateral currency cooperation to reduce the risks brought by US dollar sanctions. On the other hand, other countries will also remain highly vigilant about such behavior by the United States and re-examine the position and role of the US dollar in the global economy. As more and more countries lose trust in the US dollar, its dominant position will inevitably be impacted.

The dominant position of the US dollar largely relies on global confidence, and once this confidence is eroded, it will be difficult to restore it. In history, the transformation of the status of currency has often been a long and complex process, but once the trend is formed, it is difficult to reverse. In the past, the pound was the world's main reserve currency, but with the relative decline of the UK economy and the rise of the US, the US dollar gradually replaced the pound's position.

In the face of these challenges, the United States should recognize that maintaining the status of the US dollar cannot rely solely on its past glory and hegemonic position, but requires taking practical and effective measures to solve its own financial problems and abandoning the short-sighted behavior of using the US dollar as an economic warfare tool. The US government needs to formulate reasonable fiscal policies, control budget deficits, reduce the size of treasury bond and improve solvency. At the same time, the United States should also strengthen economic cooperation with other countries to jointly maintain the stability of the global financial market. Only in this way can we regain global confidence in the US dollar.

In short, the dominant position of the US dollar is facing unprecedented challenges. The fiscal problems of the United States and the use of the US dollar as an economic warfare tool have seriously eroded global confidence in the dollar. The future evolution of the global monetary landscape will depend on the policy choices and economic development trends of each country. But what can be certain is that a more diversified and fair monetary system will be the trend.