The dollar debate is getting interesting again.
One side says look at actual usage — 90% of FX trades still touch dollars, even after 2022. The infrastructure is so deep that even hostile governments default to it. It's not just a currency, it's the entire plumbing system.
The other side says that's just residual dominance. Sterling looked untouchable in 1931 with 63% of reserves, then collapsed in sixteen years. What drove dollar usage was cheap borrowing — that arbitrage is now gone. 10-year Treasuries at 4.75% vs China at 1.67% flips the whole logic.
The real shift nobody's talking about: for the first time, the U.S. is settling trade deficits by exporting equities, not debt. That's never happened before in the dollar era. If the AI bubble corrects, it's not just a stock event — it becomes a currency event.
One camp thinks fragmentation is a productivity downgrade the world won't accept. The other thinks trust breaks fast, the way it did for Britain — mostly after the fact.
Is the dollar's edge structural, or just the last one standing before the next transition?
Either way, the assumption that it's permanent is starting to look lazy.
One side says look at actual usage — 90% of FX trades still touch dollars, even after 2022. The infrastructure is so deep that even hostile governments default to it. It's not just a currency, it's the entire plumbing system.
The other side says that's just residual dominance. Sterling looked untouchable in 1931 with 63% of reserves, then collapsed in sixteen years. What drove dollar usage was cheap borrowing — that arbitrage is now gone. 10-year Treasuries at 4.75% vs China at 1.67% flips the whole logic.
The real shift nobody's talking about: for the first time, the U.S. is settling trade deficits by exporting equities, not debt. That's never happened before in the dollar era. If the AI bubble corrects, it's not just a stock event — it becomes a currency event.
One camp thinks fragmentation is a productivity downgrade the world won't accept. The other thinks trust breaks fast, the way it did for Britain — mostly after the fact.
Is the dollar's edge structural, or just the last one standing before the next transition?
Either way, the assumption that it's permanent is starting to look lazy.