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00:00Good morning. It is Sunday, July 13th. 81 years ago, next Saturday, on July 22nd, 1944,

00:08leaders of 44 allied nations were waking up at the historic Grand Mount Washington, New Hampshire.

00:15They'd spent a busy few days there, and on that particular day, the effort to create a new post-war

00:20economic order would culminate in the signing of an unprecedented agreement, one which would

00:25established for the world of money what World War II established for the world of military power,

00:30that the U.S. was the global leader. They all met in the hotel's famous gold room to sign the

00:37Bretton Woods Agreement and usher in the era of U.S. dominance. It took another 20 years or so,

00:43but by the early 1970s, the U.S. dollar had become the de facto currency for all important trade around

00:49the world. Many countries pegged their own currencies to the U.S. dollar, all major global commodities,

00:54including oil, gold, and produce, are now traded in U.S. dollars. The agreement signed that day in

01:00Bretton Woods also created key institutions like the International Monetary Fund and the World Bank

01:05to help stabilize the global financial system. Later, my next guest would serve as the chief

01:10economist for the International Monetary Fund. Today, the Federal Reserve estimates that in recent

01:15decades, the dollar has been involved in about 90 percent of global foreign exchange transactions

01:21and over 70 percent of trade with Asia alone. The reserve currency status keeps U.S. borrowing

01:28costs low. It supports our financial markets. And most importantly, it gives the United States

01:33enormous, enormous geopolitical power. But today, we're witnessing an historic decline in the value

01:40of the dollar. Over the past six months, the dollar has lost more than 10 percent of its value against

01:45other major currencies, a magnitude of a drop that we have not seen since 1973. Right now,

01:52the value of the U.S. dollar against a basket of important global currencies is sitting at a three-year

01:57low. So what does that actually mean when the U.S. dollar drops in value? And why should it matter to us?

02:04Well, here's the first thing to know. Regardless of whether you travel or you trade, when the dollar

02:08falls, it touches almost every corner of American life, from your wallet to the price of everyday goods,

02:13to the government's ability to keep programs running, and even to America's power on the global stage.

02:20At home, a weaker dollar makes imports more expensive. And given that we are a major importer,

02:24it drives most prices higher. Businesses pay more for raw materials and imported parts. And in most cases,

02:31those costs get passed on to a consumer. That means higher prices at the grocery store,

02:35at the gas pump, and for countless everyday products. It eats directly into your purchasing power,

02:41meaning your paycheck buys less. Now, in fairness, there are some upsides to a lower dollar. A cheaper

02:47dollar can make some American exports more competitive abroad, boosting certain industries

02:52that export goods and services to other countries. But the bigger picture is more troubling. One big

02:58reason the dollar's been sliding is because foreign investors are starting to lose confidence in the

03:03U.S. economy. A fundamental loss of faith fueled by ballooning debt, by political dysfunction,

03:08and by economic uncertainty driven by President Trump's aggressive, unpredictable, and illogical

03:13tariff threats. Simply put, global investors no longer see the U.S. as being as reliable as it once

03:19was, and expectations that the U.S. will continue to keep outperforming the rest of the world

03:24economically are waning. For decades, foreign investors poured money into American assets,

03:31generally, and bonds issued by the U.S. Treasury, specifically, because they saw U.S. markets

03:37as the single safest bet on the entire planet. But now major global investors, and here I am talking

03:43about countries and sovereign wealth funds, the biggest of investors, they're starting to look

03:48elsewhere. Crucially, the dollar isn't just our currency. It's the globe's currency. The U.S. dollar

03:55is referred to as the reserve currency of the world, which is at the heart of our soft power. As foreign

04:01policy expert Edward Fishman notes, when the U.S. wanted to put pressure on Iran over its controversial

04:06nuclear program back in 2015, it didn't send in troops. It used the power of the dollar to cut

04:12Iran off from the world's financial system through secondary sanctions against banks that did business

04:17with Iran. That move single-handedly strangled Iran's economy. It forced it to the negotiating table.

04:23That kind of financial leverage, rather than military force, has allowed America to shape its global

04:28interests without committing American lives. But if the dollar keeps losing value and investors keep

04:33moving away, some of that leverage starts to fade. Other currencies, like China's yuan, could

04:38potentially slowly start to challenge the dollar's dominance. And if the dollar's roll as the world's

04:44reserve currency weakens, America risks losing one of its most powerful tools of influence.

04:49And then that's not no longer just an economic problem. It's a potential national security issue,

04:54which brings us back to the U.S. bond market, the true bedrock of America's economic strength.

05:00U.S. government bonds, known as treasuries, are backed by the full faith and credit of the United

05:04States government, which has never defaulted on its debt. Investors trust that no matter what's

05:09happening in the world, wars, recessions, market crashes, the U.S. will keep making its interest

05:15payments on time. But recently, Trump's aggressive tariff and erratic trade war fueling economic

05:20uncertainty. Well, that's caused that faith to start to crack. Foreign investors have begun selling

05:26off U.S. treasuries. And that's a bigger warning sign than a sell-off on the stock market. The size

05:32of the entire stock market is dwarfed by the bond market, which is also referred to as the debt

05:37market. The main difference is when you buy stock, you're an investor in a company. When you buy a bond,

05:43you're a lender to a company or, in the case of treasuries, to a country, America. And just like a

05:49company that needs to borrow money, if trust in the U.S.'s ability to pay debt erodes, the government

05:54is forced to pay a higher interest rate to attract borrowers. And that drives our deficits higher.

06:00It leaves less money for critical programs like Social Security and defense. Over time, it can

06:05shake the very stability that underpins American economic strength. Now, look, this is not all doom

06:11and gloom. The U.S. still has major investment advantages, including a huge liquid financial market

06:18and the sheer size of our economy. And for now, there isn't any clear alternative to replace the

06:23dollar. But, and this is a big but, history shows that once trust in a currency starts to erode,

06:30it is very hard and sometimes impossible to rebuild. Ask the British about the pound.

06:36And the shift doesn't happen overnight. It happens slowly. Then all of a sudden it compounds. And once

06:40that trust is gone, it's not just numbers on a chart that suffer. It is the cost of living,

06:44the stability of your retirement savings, the government's ability to keep its promises

06:48and America's place in the world. If global investors lose their confidence in America's

06:54ability to honor its financial obligations, it makes it harder for the government to pay

06:57its bills. It erodes soft power. In short, the dollar's decline is a warning sign about our

07:03economic health, our political stability and our place in the world. And that makes this more than

07:10just an economic story. It's about America's standing and whether we will one day become

07:14a footnote in the history of great powers that squandered their strength, undone by the reckless

07:19decisions of a would-be king in the White House.

Why The US Dollar’s Decline Could Signal End of Global Power | Dollar Collapse 2025 Explained

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