Dollar Signs: US Financial Dominance and the Future of American Power and Democracy

At the Academy, Copelovitch is working on a new book, “Dollar Signs: The Myth of American Decline and the Future of World Order,” exploring the causes and consequences of the US dollar’s enduring dominance in the world economy. Despite frequent predictions to the contrary, the dollar’s dominance in global finance persists, and in fact has become even more firmly entrenched in the wake of the economic crises of the last two decades. This will continue for many years, not least because none of the dollar’s supposed challengers – including the euro and the renminbi – meet the economic or political requirements to supplant it as the world’s primary global currency. The book will analyze the sources of dollar hegemony and explain how recent events, including the policy responses to Russia’s invasion of Ukraine and the pandemic economic crisis, illustrate its implications for both American economic policy and international relations. Understanding the dollar’s dominance opens our eyes to the possibility of more ambitious economic policy at home, and it has crucial yet widely unappreciated implications for how we view America’s position in world affairs. Domestically, the failure to appreciate the consequences of dollar hegemony has fueled a misguided, decades-long political debate about America’s supposedly “unsustainable” debt and deficits, leaving us unwilling to invest sufficiently in the infrastructure, clean energy, social policies, higher education, and other public goods we need to meet the serious policy challenges of the twenty-first century. Globally, the dollar’s dominance in international finance remains the keystone of American power. Yet recognition of this is glaringly absent from current foreign policy debates about the rise of China and the decline of American hegemony – a still-unfulfilled prediction entering its fifth decade, with China now replacing Japan and the Soviet Union as the supposed heir apparent. To be sure, China’s rise has made it a global power and reshaped both geopolitics and the world economy. Yet China remains only a small player in global finance, and the renminbi is not remotely close to challenging the euro, let alone the dollar, on the world stage. Instead, global finance remains overwhelmingly a transatlantic dollar-euro duopoly. This has major implications for international security and global governance, and it ensures that transatlantic economic and geopolitical ties will remain the world’s most important “special relationship” and the centerpiece of world order for years to come.