The dollar is dead. Long live the dollar.

If 2020 confirmed one thing, it was the centrality of the dollar to the global economy. U.S. hegemony may already have passed us in a political and strategic sense, but U.S. financial influence is proving more enduring. This is reassuring in the sense that the U.S. Federal Reserve has once again acted as a responsive and generous steward of the dollar-based financial system. But it is also a cause of puzzlement and frustration.

While China and Russia experiment with alternatives to the dollar-based payment system, in Europe the buzzword of the day is “strategic autonomy.” Given the increasing aggression of Washington’s financial sanctions, compounded by the capriciousness of the presidency of Donald Trump, this is hardly surprising. It is an obvious reaction to the weaponization of interdependence.

It is far from obvious to critics that dollar hegemony is an unalloyed blessing. Inequality, deindustrialization, and the loss of well-paid and secure blue-collar jobs can all be blamed on the dollar’s strength. In that sense, the dollar’s standing and Trumpian populism are not so much contradictions as functionally interconnected. One helped cause the other.

Read the full article at Foreign Policy.