Dollar's Dominance in Crisis as US Sanctions Backfire

The recent actions by the US Treasury to save the yen and intervene in the global financial system have failed, leading to a growing crisis for the dollar's dominance. The Treasury's efforts to lower long-term interest rates through bond purchases have been deemed inadequate, and its attempts to isolate Iran through economic sanctions have backfired.

According to Michael Hudson, economist and professor, the US is shifting from a military to an economic war with Iran, which will only drive more Persian Gulf funds away from the dollar system. This would put pressure on trading partners of Iran, potentially 'blowing up' the global financial system.

The Federal Reserve faces a dilemma: raising interest rates could jeopardize the historic everything bubble fueled by easy monetary policy. Meanwhile, countries are moving towards creating their own payment systems outside the US dollar-dominated SWIFT messaging system, with China's Cross-Border Interbank Payment System being a notable example.