NAVAL WAR COLLEGE NEWPORT RI NEWPORT United States
In the coming decades, the largest threat to American military readiness and the national security of the United States is the slow global transition away from the dollar to a new global currency standard. This paper assumes the transition from the dollar will begin soon and could be complete in the next three to four decades. There are a few identifiable alternatives with the potential to replace the dollar as the global standard in the coming decades a different single currency yuan or euro a mix of currencies rebalancing the dollar dollar, euro, yen, and yuan mix and a digital currency operating independently of central banks cryptocurrencies. The transition to one of these alternatives will coincide with declining American economic power caused by a decrease in discretionary spending capacity and an increase in foreign-exchange transaction costs. Mirroring the petrodollar model with a new high-demand commodity or creating an American-backed cryptocurrency are two ways to prolong the dominance of the dollar, but the bipartisan political support for either remains uncertain. The impact of the global currency transition on American national security will severely shape Americas global role for the duration of the twenty-first century.