The End of Dollar Supremacy?. The coming of a dollar crisis would expose the internal fragilities of the U.S. economy which currently are largely hidden. Along with the end of the favors for consumers to indulge in spending and for private and public debtors to have their investment and budget deficits financed by foreigners, a decline of the dollar would expose the lack of a balanced industrial structure in the United States. More than twenty years of persistently high trade deficits have led to an industrial structure which has made the United States highly dependent on foreign imports with a lack of domestic suppliers that could readily substitute dearer imports.
What would happen if the dollar should surpass the threshold and a crisis of confidence emerges? The consequences would not be confined to the United States itself. The dollar crisis would affect the rest of the world and it would put the current international monetary system at stake with the potential of bringing it down. While the pillars on which the dollar stands may still seem to be intact today÷the statue itself may come down. But when the dollar should fall, the pillars on which it has stood, will crumble too.
Given the trend that the U.S. foreign debt position will continue to deteriorate, a severe dollar crisis seems almost inevitable. But this is only half of the story. The dramatic part of the enfolding scenario is that there is no ready substitute for the dollar as a global currency and that the dollar crisis will put the overall economic and political position of the United States at risk. With the loss of the privileged position of the dollar the economy would weaken and this in turn would undermine the political role that the Unted States plays presently as the world's hegemon. [Ludwig von Mises Institute]