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The Dollar's Vulnerability and the Threat to National Security

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Journal article

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The decline of the United States as a great power has been a popular topic with pundits for years. The same is true of the U.S. dollar subsequently referred to as dollar and its role as the worlds dominant international currency. Not surprisingly, the loss of such currency status has historically coincided with the loss of great power status. These two interrelated issues have recently become of increasing concern due to rising levels of U.S. deficit spending and a growing debt burden. The unease revolves around whether the dollars status, and by extension, the United States international leadership role, are still viable as its debt approaches record levels in absolute terms. Epitomizing this concern are the recent calls for an alternative to the dollar as the worlds central international currency by China, Russia, Brazil, and some OPEC nations, coupled with increasing pressure from large vote-carrying members of the International Monetary Fund IMF for the United States to reduce its voting shares. The purpose of this study is to identify looming vulnerabilities that may lead to the demise of the dollar, which would undermine U.S. power and compromise its national security. In identifying vulnerabilities, we consider economists views of international currency dominance and Benjamin J. Cohens state of power theory, apply those views to the historical case of the United Kingdom, and then compare that to the present-day United States in light of the National Security Strategy. There are two opposing views on the potential decline of the United States international leadership that help shape this examination. The view of Paul Kennedy, of Yale University, and that of Niall Ferguson, of Harvard University.

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  • Economics and Cost Analysis
  • Government and Political Science
  • Humanities and History

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