I remember reading a book about the Plaza Accords. The dollar's reign was being "managed" then—today it's being tested by something far more potent: self-inflicted wounds from Washington.
The current administration appears to be conducting a masterclass in how to undermine your own economic advantages. And boy, they're doing it with gusto.
Look, I'm not saying the sky is falling. It's not. During a recent trip through Singapore, Hong Kong and Tokyo, business seemed... fine. Markets function. People aren't panicking. But there's this uneasy hum beneath the surface conversations.
"Trade wars are good and easy to win." That's the kind of statement that makes veteran currency traders choke on their coffee. (Trust me, I've seen it happen.) It ranks right up there with "housing prices always go up" in the pantheon of catastrophically misguided economic pronouncements.
What we're witnessing isn't a collapse—it's erosion.
The foundation supporting the dollar's exceptionalism has always been institutional credibility. Our central bank's independence. Our judiciary's reliability. Our commitment to international norms. When you start treating these pillars like punching bags... well, markets notice.
I had drinks with a Singaporean sovereign wealth manager last week. Smart guy, manages billions.
"We're not panicking," he told me, swirling his whiskey thoughtfully. "Just methodically preparing for a world where the dollar is merely first among equals."
That phrase—"methodically preparing"—should send shivers down Washington's spine. But it won't.
The administration seems wedded to what I've started calling the "Negotiating Through Chaos" theory. Create enough disruption and your counterparties will fold simply to restore order. Works sometimes in corporate takeovers. National currencies? Not so much.
What's particularly maddening—and I've covered economic policy for over twenty years—is how unnecessary this all is. The dollar's dominance has been FANTASTIC for average Americans. Lower interest rates. Cheaper imports. Enhanced global leverage. It's the economic equivalent of being born on third base.
And we're deliberately walking back to first.
Central banks from Frankfurt to Seoul are quietly—very quietly—diversifying their reserves. The petrodollar system, that brilliant Nixon-era innovation, is developing interesting stress fractures. None of this happens overnight. Currency regime changes unfold gradually... until they suddenly don't.
The irony is rich enough to tax at top rates: an administration obsessed with "American greatness" is systematically dismantling the very architecture that made America financially exceptional.
(Side note: The building where I interviewed that Singapore fund manager was literally across from the local Fed office. The symbolism wasn't lost on either of us.)
To be abundantly clear: This isn't about partisan politics. This is about institutional stewardship. When you pick simultaneous fights with trading partners, undermine your central bank's independence, and casually disregard international court rulings... these things have consequences.
The historical parallel that keeps me up at night? Sterling's slow-motion dethroning after WWII. Britain didn't lose reserve currency status because of one dramatic event. They lost it through a thousand small cuts to credibility.
Sound familiar?
The structural shifts underway will reshape global finance for decades. Yet the administration can barely think beyond tomorrow's headlines. That time horizon mismatch alone would terrify me even if everything else were being brilliantly executed.
Which it emphatically is not.
So here we stand—watching a superpower saw enthusiastically at the branch supporting its economic advantages. Markets will adapt, as they always do. New equilibria will form. Trade continues. Life goes on.
But America's special position isn't a birthright—it took generations to build.
And apparently just one administration to seriously endanger.
