The Current State of the U.S. Dollar

 

The Current State of the U.S. Dollar

During World War II, the United States primarily engaged in the export and sale of military weaponry and supplies, which generated immense profits and led to a steady increase in the value of the U.S. dollar.

By the 1960s, global trade currency had become heavily dependent on the U.S. dollar. This was due to the perceived stability of the U.S. government’s financial policies and the guarantee that the dollar could be exchanged for gold at a rate of $35 per ounce.

However, between 1963 and 1966, France noticed that the United States no longer held enough gold reserves to back the total amount of U.S. dollars in global circulation. Consequently, France redeemed a total of 3,313 metric tons of gold at the $35/ounce rate, a move subsequently followed by other nations.

Due to the severe depletion of gold reserves, President Richard Nixon issued what became known as the "Nixon Shock" in 1971. This act suspended the convertibility of the dollar into gold, transitioning the dollar from a gold-backed currency to a "fiat currency" system. From that point forward, the dollar's influence faced increasingly complex challenges.

In 1973, Secretary of State Henry Kissinger reached an understanding with Saudi Arabia, the world's largest oil producer. Under this agreement, the U.S. guaranteed Saudi security in exchange for Saudi Arabia agreeing to price oil exclusively in U.S. dollars. This "Petrodollar" system restored the strength of the dollar on the world stage. However, since the 1990s, waning stability in U.S. foreign policy has led to growing doubts regarding the value of the dollar.

In 2005, during the presidency of George W. Bush, France began its second systematic repatriation of its gold. During President Trump's second term in 2025, France's sale of its remaining 129 tons of gold into the global market, using both dollar and euro-based systems, could be seen as a sign pointing toward a new monetary system.

Many have noted that since President Trump’s second term began, his prioritization of specific groups in political, economic, and military decision-making has led to a decline in American influence.

In particular, the blockage of the Strait of Hormuz due to military tensions regarding Iran has halted over 20 percent of the world's oil flow. This has effectively "strangled" the oil-dependent dollar system.

Meanwhile, as Saudi Arabia and other Middle Eastern nations question whether the U.S. can continue to guarantee their security, their reliance on the dollar is diminishing—marking the beginning of "De-dollarization."

The Iran crisis currently facing Trump demonstrates the need for a re-evaluation of U.S. foreign and military policy. If the Strait of Hormuz remains closed and Arab nations become targets of Iran, the link between oil and the dollar could be severed. This could lead to a decline in the value of the U.S. currency and push the nation into a debt trap. Therefore, it can be said that there are few ways to escape this situation other than ending the current military tensions and resolving the conflict through diplomatic means.

2026 Up-to-Date Some of the top countries with the largest gold reserves in the world are as follows:

• United States: Over 8,133 tons

• Germany: Over 3,350 tons

• Italy: Approximately 2,452 tons

• France: 2,437 tons

• China: Approximately 2,313 tons