Paul Blustein on the Rise, Dominance, and Current Challenges to King Dollar

This episode explores the history, present status, and potential future of the U.S. dollar as the world's dominant currency. Against the backdrop of recurring predictions of the dollar's demise, the discussion delves into the key historical moments that shaped its rise, including the establishment of the Federal Reserve, the Bretton Woods agreement, and the Nixon Shock. More significantly, the conversation highlights the crucial role of the U.S. Treasury market's liquidity in maintaining dollar dominance, illustrated by the anecdote of Saudi Arabia's investment in U.S. Treasuries during the 1970s. As the discussion pivoted to the use of dollar dominance in statecraft, particularly through sanctions, the North Korea "supernote" scandal and the Iran nuclear deal were cited as examples of both the power and potential pitfalls of this approach. Finally, the episode concludes by examining potential threats to dollar dominance, such as political dysfunction, weaponization fatigue, and the proposed "Mar-a-Lago Accord," which aims to devalue the dollar, potentially undermining trust in the Treasury market and global financial stability.