The US National debt is approaching $39 trillion, exceeding 120% of the overall country’s GDP. The development highlights that debt has outpaced annual economic output and has entered dangerous territory. Even Federal interest payments have exceeded the National defense spending, and the Iran war is making it worse. Despite all of these, the US dollar still remains the king of the financial world. How? In this article, we will explain why the USD remains the undisputed global reserve currency despite facing increasingly challenging conditions.

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3 Things Hold the US Dollar Steady in the Global Markets

The US has a fiscal deficit of around 6% of its overall GDP. This means that the government is spending more than the country earns per year. The majority of developed countries aim for a deficit of less than 3% of their GDP. The US has doubled it here, and no leader is providing a solution to come out of the mess. However, 3 things have shaped the US dollar, maintaining its status despite the challenges.

1. Almost every central bank in the world keeps the US dollar as the primary reserve currency.
2. Every single barrel of crude oil is bought and sold in the US dollar. (Exception remains due to the recent de-dollarization trend).
3. All global transactions, be it in trade, investments, debt, or loans, are paid in the USD.

These transactions themselves are worth billions of dollars that keep the currency afloat. Even after 80 years, the currency has not flinched or come close to the brink. While the central bank diversification began in 2022, they are still a long way from completely replacing it. The de-dollarization agenda is also slowing down, and only countries that are sanctioned are initiating the process, and it’s not out of free will. For instance, Russia was considering getting back to trading in the USD and was planning a deal with Trump.