A world where the U.S. dollar is no longer king is a world that looks very different. More fragmented, less stable, and, according to seasoned observers, a whole lot more painful.
“De-dollarization is a structural shift in global demand for the dollar in reserves, trade and finance,” J.P. Morgan‘s head of Global Macro Research, Louis Oganes, said in a recent note. This thesis means countries no longer feel safe relying on a currency controlled by Washington. And that shift is already visible in central bank reserves, commodity trade, and even bilateral settlements in Chinese yuan, Russian rubles, or Indian rupees. So yes, the dollar’s grip is loosening, but don’t expect that to happen quietly.
Brent Johnson, CEO of Santiago Capital and the mind behind the Dollar Milkshake Theory, spoke on the process in one of his recent YouTube videos. “The only way to de-dollarize is to delever—and de-leveraging means pain,” he noted.
Contrary to the narrative that a falling dollar equals the U.S. losing power, Johnson sees the opposite: “Every time there’s a crisis, the dollar goes up, …