The greatest threat to dollar primacy is not foreign rivals but domestic populists, fighting the wrong battle with the wrong weapons
The dollar’s dominance as a reserve currency magnifies financial power, but it does so by shifting the balance of the economy away from production toward paper. As America’s productive base gradually and unevenly hollows out, its national cohesion and material prowess, two central pillars of power, begin to erode.
Over time, the corrosive forces seep into politics, rising from the grassroots to the national stage. In the end, the greatest danger to the dollar-based global order may be the American voters who must live with its consequences.
The political costs of hollowed-out power
American communities built around tradable industries experience the dollar-based reserve-currency system less as stability than as a source of permanent headwinds: lost contracts, shuttered factories, and a relentless struggle against a structurally elevated dollar they never chose to face.
The gains of dollar dominance accrue quietly in the rarefied citadels of high finance, technical in character and largely invisible to the general public. Its costs, by contrast, are dispersed across the local economy, plainly visible to all and deeply personal to those who must bear them. It is within this widening chasm between lofty monetary privilege and ordinary economic experience that populist rebellion begins to take shape.
Real estate tycoon and reality-TV showman Donald Trump spearheaded an anti-elite revolt despite being a quintessential product of the very elite he railed against. He built a formidable electoral movement on the unsubstantiated assertion that America’s economic decline stemmed from foreign cheating, and on the promise that tariffs could reverse the damage. Once in office, the insurgent-turned-president translated that premise and pledge into policy, launching sweeping trade wars marketed as industrial renewal.
Ultimately, Trump, the mercantilist in chief, trades in demiurgic illusion, resorting to a classic maneuver from the populist playbook. Populism consists in exploiting complex structural tensions through misleading simplicity in the contest of narratives, arguably the very essence of politics: easy remedies based on false diagnoses and misplaced attributions.
In practice, populism reduces real grievances to seductive, prefabricated tales of archetypal villains and ritual scapegoats, of egregious betrayal and sabotage, and of alluring promises of effortless restoration.
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