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Quick takeaways

  • The U.S. dollar, while currently the global reserve currency, faces significant risks due to high national debt and trade deficits.
  • Trump's tariffs could provoke severe Chinese retaliation, potentially triggering higher interest rates and exacerbating global economic instability.

Deep dives

The Status of the U.S. Dollar as Reserve Currency

The U.S. dollar is currently the primary reserve currency, meaning it is widely used in international trade. This status arose after World War II when the U.S. dollar was pegged to gold, as other nations were financially weakened. The continued dominance of the dollar has been facilitated by significant trade deficits totaling approximately $16 trillion, allowing surplus countries to invest heavily in U.S. dollar assets. However, this system now faces substantial risks as the dollar's backing by gold was abandoned in the 1970s, transforming it into a currency based solely on credit.

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