What Happens If America Gives Up the Dollar's Dominance?

American Greatness | Jonathan Dever

The United States faces unprecedented fiscal instability and a dramatic loss of geopolitical leverage if Washington permits the erosion of the US dollar’s global reserve currency dominance. This shift would immediately restrict the federal government's capacity to run massive budget deficits, issue cheap debt to foreign buyers, and fund domestic programs.

Historically, the post-World War II Bretton Woods system established the greenback as the anchor of international trade, enabling decades of American economic hegemony. A transition away from this framework would trigger rapid domestic inflation and elevate borrowing costs. Domestic interest rates would soar. Strategic competitors like China and the expanded BRICS alliance are actively positioning alternative non-dollar trade settlement mechanisms to exploit any American economic retreat. Consequently, the loss of dollar supremacy would force a contraction of US military commitments abroad and permanently alter the global balance of power.

Comment

The erosion of the US dollar's reserve status directly threatens the long-term viability of capital-intensive Pentagon modernisation efforts like the LGM-35A Sentinel ICBM programme. Servicing federal debt will become far more expensive for the US Treasury. This fiscal pressure will inevitably force severe trade-offs within the Department of Defense's procurement accounts, jeopardising sustained funding for complex, multi-decade acquisition cycles.

Specifically, the mechanism of this budgetary contraction operates through the crowding-out effect, where rising interest payments on the US national debt displace discretionary Pentagon spending. Under a depreciated dollar, the foreign military sales (FMS) programme would also suffer, as international partners face higher relative costs for US-manufactured platforms like the F-35 Lightning II. Consequently, the US Navy's ambitious plans to expand its fleet through the SSN(X) next-generation attack submarine programme would likely be curtailed due to these compounding fiscal constraints.

Strategic Question for Discussion

If rising borrowing costs force the US Treasury to restrict discretionary spending, how would the Pentagon balance the strategic trade-offs between sustaining the LGM-35A Sentinel ICBM programme and funding the US Navy's SSN(X) next-generation attack submarine?

The available evidence suggests that the Pentagon would likely prioritise the land-based leg of the nuclear triad, shielding the LGM-35A Sentinel programme due to its foundational role in strategic deterrence. Consequently, conventional modernisation efforts like the SSN(X) submarine would face deferment or downscaling, forcing the US Navy to rely on extended service lives for existing Virginia-class hulls. This trajectory indicates a shift toward a defensive, deterrence-first posture at the expense of global power projection capabilities.

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