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Is the US Dollar Immortal?: Cracks Are Showing, But the Fall Won’t Be Sudden
After eight decades of domination and cracks starting to appear, we look at whether the reign of the greenback is eternal or merely very long.
A CROWN NO ONE THOUGHT WOULD HOLD UP THIS LONG
In 1944, delegates from 44 Allied nations met at a mountain hotel in New Hampshire to rewire the global economy, with the United States dollar as the anchor of international finance (pegged to gold at $35 an ounce) and every other currency fixed to it. At that time, it was a practical if not idealistic arrangement; America had come out of World War II as the industrial powerhouse of the world with most of the world's monetary gold reserves and nearly half of global output.
Illustration by The Geostrata
No one really expected that crown placed on the head of the dollar that summer to remain there eighty years later. The dollar is still the unchallenged currency of the world, priced in oil, settled in international contracts, parked in central bank reserves, the lingua franca of money. But 2025 and 2026 have brought a reckoning.
In boardrooms, finance ministries, and geopolitical think tanks around the world, the question is no longer if the dollar is the dominant currency but whether it can stay that way.
HOW DID THE DOLLAR BECOME THE WORLD'S MONEY?
To appreciate the depth of this dominance, we need to know just how deliberately and methodically the system was designed. In 1944, the Bretton Woods system fixed the dollar to gold and made all other currencies pegged to the dollar, which was to be the foundation of a new era of global financial stability after the chaos of the Great Depression and two world wars.
It was a spectacular success for the time: the 1950s and 1960s were years of unprecedented prosperity. America overspent, however, and the Vietnam War, the space race, and the Great Society welfare programs placed the United States into a pattern of deficit spending. By 1971, foreign governments held many more dollars than the United States had gold to redeem them, and when President Nixon “closed the gold window” in August 1971, dollar-gold convertibility ended and the Bretton Woods system collapsed.
What it gave way to was arguably even more favourable to the United States: the petrodollar system, which was created in a series of agreements with Saudi Arabia and OPEC in the mid-1970s, which established that oil, the lifeblood of the global economy, would be priced and exchanged in dollars.
As one analyst noted, the petrodollar arrangement provided America "even greater privilege with even less discipline. This resulted in an almost unreplicable monetary architecture.
Approximately 89 percent of all foreign exchange transactions involve the dollar. Around $14 trillion of credit is dollar-dominated but held outside the United States. Around 40 to 50 percent of all trade invoicing is in the greenback. These are not simply statistics, but the skeleton of the global financial system.
THE CASE THAT THE DOLLAR IS IMMORTAL
The pessimists on the question of dollar dominance have been proven wrong before, and they have been proven wrong repeatedly and spectacularly. In the 1970s, when the collapse of Bretton Woods was to bring the dollar down; in the 1980s, when the Japanese yen was to supplant the dollar; and in the early 2000s, when the euro's introduction was to prompt serious prognostications that a rival reserve currency would dislodge the dollar. None happened. Why?
Because if you want to dethrone a reserve currency, you need not only a challenger, but an alternative system with deep capital markets, freely convertible currency, rule of law, and trust by the international community. No rival comes close on all these dimensions.
The euro, which is second on the list of reserve currencies, accounts for about 20 percent of central bank holdings, while the Chinese renminbi, the currency of the second-largest economy and most active trading nation in the world, accounts for only 7 percent of foreign exchange trading volumes; its limitations are structural.
China still has capital controls, its bond market is not open to foreigners, and, most importantly, the Chinese government has not shown the institutional predictability that reserve currency status entails.
Thus, the dollar continued to comprise almost 57 percent of global foreign exchange reserves as of the third quarter of 2025, far more than any other currency. The share of the dollar in trade invoicing has remained at 40 to 50 percent for two decades. These figures do not represent a currency in freefall; they represent a currency that is dominant and slowly yielding ground.
Switching away from the dollar is not like switching banks; it means reconstructing the plumbing of international commerce. Shipping contracts, commodity futures, cross-border loan agreements, and central bank swap lines are all denominated in dollars and embedded in American legal architecture. The network effects that keep the dollar going are, quite simply, monumental.
THE CRACKS IN THE FOUNDATION
And yet, 2025 and 2026 have seen something qualitatively different from past de-dollarisation scares. It is now America's allies, rather than just its adversaries, that are retreating from the dollar. In July 2025, France, America's oldest ally, removed 129 tons of gold from the Federal Reserve Bank of New York, where it had been stored, and returned it to Paris.
Canada announced a sovereign wealth fund, in part to minimise economic reliance on the United States. These are not the actions of an adversarial bloc positioning itself against U.S. power; they are the actions of countries that have simply become sceptical of U.S. reliability.
The dollar has been a powerful tool of foreign policy, but it has also been weaponised in the form of sanctions. Alarming neutral and even friendly nations about the risks of dollar dependence and causing countries to watch as Russia saw its foreign exchange reserves frozen overnight to ask the question: could this happen to us? The answer is, in theory, yes, and this has driven a quiet but persistent diversification.
The BRICS nations, the original six nations of Brazil, Russia, India, China, South Africa, and a growing list of newer members including Egypt, the UAE, and Indonesia, are moving more quickly to create dollar alternatives. China has increased its Cross-Border Interbank Payment System (CIPS) to over 1,500 indirect participants. A blockchain-based alternative to SWIFT is being tested.
The mBridge multi-currency platform had reached $55 billion in cumulative transaction volume by November 2025. These are tiny numbers compared to global financial flows, but they represent infrastructure being laid in stealth.
In 2025, however, the dollar was battered, losing almost 10 percent of its value against a basket of major currencies as investors piled into what traders dubbed the "Sell America" trade: a selloff of U.S. equities, bonds, and currency that challenged long-held assumptions about the dollar as a safe haven. When President Trump brushed off dollar depreciation in January 2026, it caused a new reevaluation of whether U.S. policy would remain supportive of the strong dollar.
The foreign exchange team at Deutsche Bank sparked controversy in March 2026 when a senior strategist argued that the Iran war could be the start of "erosion in petrodollar dominance, and the beginnings of the petroyuan," the first time oil revenues might begin to flow through Chinese rather than American financial infrastructure.
THE LONG DECLINE VS THE SUDDEN SHOCK
There are two very different historical scenarios for the transition of reserve currencies, one of which might be more likely than the other.
First, there is gradual erosion, the decades-long process by which the share of dollars in global reserves has already fallen from over 70 percent in 1999 to just under 57 percent today. In this model, de-dollarisation is real but quantified. The dollar remained preeminent through the middle of the century but increasingly surrendered ground to a basket of alternatives: the euro, renminbi, gold, and perhaps new digital instruments. The world does not forsake the dollar; it merely creates redundancies around it.
The second scenario is a shock: a geopolitical rupture, a fiscal crisis, or a policy misstep that causes a loss of confidence to occur quickly, perhaps when foreign holders of US Treasury bonds (currently about 30 percent of the market, down from over 50 percent at the time of the financial crisis) all decide to reduce their exposure at the same time. The US fiscal position, with debt-to-GDP ratios at or near historic highs, offers less room for error than at any time in the history of the dollar's dominance.
JP Morgan has warned about this scenario: "More than a decade of growth in the Treasury market has outpaced foreign demand, and we must ask what more aggressive action would mean." The question is whether the erosion remains gradual or shifts into something quicker.
WHAT WOULD IT TAKE TO KILL THE DOLLAR DOMINANCE?
It would take a confluence of events that, for now, remains unlikely in combination, even though each is individually plausible, to kill the dollar's reserve status. That would mean a credible alternative, and with the economic mass behind it, the renminbi is the only realistic candidate, although China's capital controls, its lack of an open bond market, and the geopolitical distrust many nations have toward Beijing remain major impediments.
No BRICS currency has emerged to take on the dollar in scale; the bloc scrapped plans for a common currency and has moved to a project of connecting national payment systems.
This would entail a series of repeated, serious policy mistakes by the United States- mistakes that undermine the institutional credibility, fiscal discipline, and rule of law that ultimately undergird the dollar. The 2025 tariff shocks, public ambivalence about dollar strength, and the rising US debt burden are all warning signs on this front, but not yet conclusive ones.
It would require a new plumbing system for global finance: payment networks, clearing houses, legal frameworks, and financial instruments that do not run through New York. This new plumbing is being erected, haltingly, but will take decades to mature.
THE VERDICT: MORTAL, BUT REMARKABLY DURABLE
No currency in history is immortal. The British pound sterling was once the universal language of international commerce, and then it ceded primacy over the 20th century. But the timing matters. The decline of the pound occurred over generations, hastened by two world wars that drained Britain economically.
The dollar has lasted a half-century longer than expected, and its structural advantages- the depth of American capital markets, the liquidity of US Treasuries, the global infrastructure built around dollar settlement- are not things that can be dismantled rapidly.
But 2025 and 2026 have clarified that the trajectory has changed. This is not a version of the de-dollarisation conversation that has come and gone from time to time. Allies of America are hedging. Serious work is going into alternative payment systems. The fiscal and geopolitical underpinnings that support dollar confidence are under real stress. For a quarter century, the share of dollars in global reserves has been in a steady, measured decline.
The greenback is not immortal. But if and when the dollar passes, it will be a slow death, unfolding over decades, not days, and it will remain what it has been since 1944: not only a currency, but the very grammar of the global economy. It’ll take a long time to learn a new grammar.
BY PRIYANKA YADAV
TEAM GEOSTRATA
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