US Dollar Dominance Brings Economic Leverage with Unintended Consequences

The US dollar remains the world's principal reserve currency and international settlement currency due to its liquidity and widespread acceptance in times of financial stress.

This central role grants the United States significant economic leverage, particularly through financial sanctions. However, the US dollar-centered global system also imposes constraints on this power.

The US is constrained by the need to maintain the stability and liquidity of the dollar-denominated assets that underpin its own economy, as well as those of other countries that rely on them for reserve purposes.