When economists seek to account for the dollar’s outsize role as the only true global currency, they point to structural factors such as the US share of world GDP, or the depth and liquidity of US financial markets. This approach underlies the sanguine view of many financial market participants that, come what may, so long as the US remains the world’s leading economy, the dollar will remain its safe haven.
The second Trump administration is a reminder that raw numbers can only take us so far. For as historians will tell you, it is the actions of people, not economies or markets in the abstract, that explain how international currencies rise and fall. It was people who took the crucial steps to build the institutions that made the international dollar. And it is people who will ultimately determine whether these same institutions survive or fail.
