The Shelf Life of Power: Why No Currency Rules Forever

Every empire believes it will be the exception. The Romans thought it. The British thought it. And for the better part of a century, Americans have thought it too — not about territory, necessarily, but about something arguably more powerful: the currency the rest of the world is forced to trust.

Here is the uncomfortable arithmetic. Across roughly six centuries of recorded monetary history, no single currency has held the throne of global trade for longer than about a hundred years. The average, depending on how generously you define “dominance,” lands somewhere around 94 years.^[1] The United States dollar, whose reign most historians date to the aftermath of the Bretton Woods agreement in 1944, is now 82 years into that window. Others peg the beginning earlier — to the post-World War I period when the dollar first eclipsed the pound — which would place it closer to year 86. Either way, the clock is ticking, and the pattern that preceded it has been remarkably consistent.

A Parade of Fallen Crowns

Portugal kicked things off. In the mid-fifteenth century, the Portuguese escudo rode the back of Vasco da Gama’s spice routes and a sprawling maritime network that stretched from Goa to Macau. For roughly eighty years, between 1450 and 1530, Lisbon’s currency was the lubricant of intercontinental commerce. But empires built on trade routes are only as strong as their ability to defend them, and Portugal — small, thinly stretched, and eventually absorbed into the Spanish Habsburg crown — could not.

Spain picked up the mantle. The discovery of the Americas poured silver from Potosí and gold from the Aztec and Inca empires into Spanish coffers, and the real de a ocho — the famous “piece of eight” — became the closest thing the sixteenth century had to a universal currency. Spanish coinage circulated from Manila to Amsterdam. But Spain made a mistake that would echo through every empire that followed: it confused the accumulation of wealth with the production of it. Inflation ran rampant. Manufacturing withered. By the 1640s, after a string of costly wars and colonial overreach, the Spanish currency had bled out. The reign lasted roughly 110 years.

The Dutch were next, and their story is different in texture. The Netherlands did not conquer its way to monetary supremacy — it innovated there. The Amsterdam Exchange Bank, founded in 1609, essentially invented modern central banking. The guilder became trusted precisely because it was boring: stable, predictable, backed by a country that valued commerce over conquest. For about 80 years, from the 1640s to the 1720s, the guilder was the currency serious traders denominated their contracts in. It ended, as these things tend to, when military overreach — four Anglo-Dutch wars — and the rise of a larger neighbour drained the treasury.

France took its turn between roughly 1720 and 1815. The livre and later the franc benefitted from France’s sheer economic mass — it was the most populous country in Western Europe and a manufacturing powerhouse. Napoleon accelerated the process by imposing the franc across his conquered territories, making it the default settlement currency for a continent. Waterloo ended that.

And then came Britain. The pound sterling’s reign is the one most often compared to the dollar’s, and for good reason. Britain industrialised first, its navy controlled the seas, and the City of London became the gravitational centre of global finance. The pound was anchored to gold, and between roughly 1815 and the early 1920s — about 105 years — it was the unit of account that made the world legible to itself. Two world wars broke it. Britain emerged from 1945 technically victorious but financially gutted, and the baton passed across the Atlantic.

Figure 1: The lifespan of global reserve currencies, from Portugal to the present-day US dollar.

The 94-year average is marked in red.

The American Century (So Far)

The dollar’s ascendancy was formalised at Bretton Woods in 1944, where fortyfour allied nations agreed to peg their currencies to the dollar, which was itself pegged to gold at $35 an ounce. It was an elegant system — until it wasn’t. By 1971, the cost of the Vietnam War and expanding social programmes had made the gold peg untenable, and Richard Nixon severed the link. What should have been a crisis of confidence instead became a demonstration of raw structural power. The dollar survived its own demotion from gold-backed currency to pure fiat because there was simply nothing else large, liquid, or trusted enough to replace it.

That inertia has carried it for decades. As of the third quarter of 2025, IMF data shows the dollar still commands roughly 57 percent of global foreign exchange reserves^[2] — dominant by any standard. It is used in 89 percent of foreign exchange transactions, according to the Bank for International Settlements.^[3] Commodities from oil to wheat are priced in dollars. The SWIFT messaging system that underpins cross-border payments is, functionally, dollar infrastructure.^[4]

But the number that should worry Washington is the trajectory. In 1999, the dollar’s share of global reserves stood at 71 percent. By the end of 2025, that figure had slipped below 57 percent — a 31-year low, according to analysis of IMF COFER data.^[5] The decline has been gradual, almost imperceptibly slow on a quarter-by-quarter basis, but the cumulative erosion is unmistakable.

Figure 2: The US dollar’s share of global foreign exchange reserves, 1999–2025. Data from IMF COFER. The euro (dashed) has remained relatively flat while the dollar has shed 14 percentage points.

The Cracks Are Structural, Not Cosmetic

What has changed in recent years is that the forces chipping away at dollar dominance have shifted from theoretical to operational.

Start with sanctions. When Western nations froze approximately $300 billion in Russian central bank reserves in 2022,^[6] the immediate geopolitical rationale was clear. But the second-order effect was seismic: every central bank in the world quietly absorbed the lesson that dollar-denominated assets held abroad can be turned off like a light switch. Gold, by contrast, sitting in a vault in your own country, cannot be frozen by someone else’s foreign policy.

The result has been a sustained rush into bullion. Central banks purchased over 1,000 tonnes of gold annually for three consecutive years between 2022 and 2024, and 2025 came in at roughly 863 tonnes — still nearly double the pre-2022 average of 400 to 500 tonnes.^[7] China alone added over 350 tonnes to its reserves between 2020 and 2025,^[8] and the World Gold Council’s 2026 survey found that 43 percent of central banks plan to increase their gold holdings further this year.^[9]

Figure 3: Annual central bank gold purchases, 2018–2025. The 2022 freezing of Russian reserves marked a turning point, with purchases doubling from the pre-2022 average. Source: World Gold Council.

Then there is BRICS. The bloc — which now includes Brazil, Russia, India, China, South Africa, and newer entrants like Indonesia and Egypt — represents close to 40 percent of global GDP by purchasing power parity.^[10] Its members have been steadily building the plumbing for a post-dollar trading infrastructure. Russia and China now settle approximately 90 percent of their bilateral trade in rubles and yuan, bypassing the dollar entirely.^[11] A pilot programme for the BRICS Unit — a gold-backed settlement instrument — launched in late 2025, and the BRICS Pay system has reportedly reduced dollar usage in intra-bloc trade by roughly two-thirds.^[12] India, which hosts the BRICS presidency in 2026, has been more cautious — External Affairs Minister S. Jaishankar stated plainly in 2025 that India has “no policy to have a replacement to the dollar.”^[13] But even New Delhi has been paying part of its Russian energy bill in yuan and has long settled bilateral trade with Moscow in rupees.

And then there is the United States’ own fiscal trajectory. Federal debt exceeded $36 trillion as of early 2026, with annual deficits running between $1.8 and $2.2 trillion.^[14] No one is suggesting an American default. But the sheer arithmetic of compounding debt at this pace raises long-term questions about purchasing power that reserve managers — whose job, after all, is to think in decades — are responding to with their feet.

What a De-Dollarised World Actually Looks Like

It is tempting to imagine de-dollarisation as a dramatic event — a single moment where the world collectively decides to stop using greenbacks. History suggests otherwise. The pound did not collapse in a day. It faded over thirty years, from roughly 1920 to 1950, gradually losing market share to the dollar even as London remained a financial capital. A similar slow bleed is the most plausible scenario for the dollar.

The consequences, however, would be far from gentle.

For the United States, the loss of reserve currency status would mean the end of what Valéry Giscard d’Estaing famously called the “exorbitant privilege”^[15] — the ability to borrow in your own currency at rates subsidised by global demand. Treasury yields would rise, making the national debt significantly more expensive to service. American consumers, accustomed to cheap imports priced in the currency they earn, would face higher costs for everything from electronics to fuel. The Federal Reserve’s ability to export inflation by printing dollars that the rest of the world absorbs would diminish sharply. In blunt terms, America would have to start living within its means, something it has not had to do for the better part of a century.

For emerging markets, the picture is more complicated — and, in some respects, more hopeful. Countries that currently suffer from “original sin” — the inability to borrow internationally in their own currencies, forcing them to accumulate dollar reserves as insurance — would find that constraint loosened. A multipolar currency system might mean that a Brazilian exporter could settle a deal with an Indian buyer in reais and rupees, or through institutions like the BRICS New Development Bank, which has set a target of conducting 30 percent of its lending in local currencies,^[16] without either party paying the implicit tax of converting through the dollar. Exchange rate crises triggered by Federal Reserve policy — the “taper tantrums” that have periodically devastated developing economies — would become less frequent in a world where the Fed’s decisions carry less systemic weight.

But multipolarity comes with its own risks. The dollar system, for all its inequities, provides a single, deep, liquid pool that smooths global trade. Replace it with a fragmented patchwork of regional currencies and bilateral swap lines, and you introduce friction, opacity, and the potential for competing monetary blocs to weaponise their own currencies in exactly the way the United States has weaponised the dollar. The transition period — which could last decades — would be especially volatile. Markets hate uncertainty, and nothing is more uncertain than the slow renegotiation of the global monetary order.

There is also no obvious heir. The euro is structurally hamstrung by the absence of a fiscal union. The yuan is hampered by China’s unwillingness to open its capital account and allow the renminbi to float freely — a prerequisite for any currency that aspires to true reserve status. Gold is a store of value, not a medium of exchange. Cryptocurrencies lack the stability and institutional trust that reserve managers require. The most likely outcome is not a single successor but a messy, multipolar arrangement in which no one currency dominates — a world that, in some ways, would look more like the 1920s than the 2020s.

The Pattern Holds

None of this is predetermined. The United States retains enormous structural advantages — the depth of its capital markets, the rule of law, the network effects of a currency embedded in every contract and balance sheet on the planet. These are not trivial things to replace. But history’s lesson is not that dominant currencies fall because of a single blunder. They fall because the conditions that elevated them — military supremacy, trade surpluses, institutional credibility, fiscal discipline — erode gradually, often invisibly, until one day the world notices that the emperor’s currency has no clothes.

The Portuguese, the Spanish, the Dutch, the French, and the British all believed their moment was permanent. They were all wrong. Whether the dollar proves to be the exception is the most consequential economic question of the next two decades — and the honest answer, if we are willing to hear it, is that the pattern has never broken before.

^[1] Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail (New York: Avid Reader Press, 2021), pp. 93–98.

^[2] International Monetary Fund, ‘Currency Composition of Official Foreign Exchange Reserves (COFER)’, Q3 2025 data release (Washington, DC: IMF, 29 January 2026).

^[3] Christopher J. Neely and Anna Cole, ‘The U.S. Dollar’s Role as a Reserve Currency’, Federal Reserve Bank of St. Louis Open Vault, 25 February 2026.

^[4] Bank for International Settlements, Triennial Central Bank Survey: Foreign Exchange Turnover in April 2025 (Basel: BIS, 2025).

^[5] Wolf Richter, ‘Status of US Dollar as Global Reserve Currency: USD Share Drops to 31-Year Low’, Wolf Street, 28 March 2026.

^[6] Council of the European Union, ‘EU Restrictive Measures in View of Russia’s Actions

Destabilising the Situation in Ukraine’, Council Decision 2022/395, 28 February 2022. The total frozen is widely cited as approximately $300 billion.

^[7] World Gold Council, Gold Demand Trends: Full Year 2025 (London: WGC, 29 January 2026).

^[8] Visual Capitalist, ‘Central Banks Buying and Selling Gold in 2026’, Elements, 21 April 2026. Based on World Gold Council data for net changes in central bank gold reserves, 2020–2025.

^[9]World Gold Council,2026 Central Bank Gold Reserves Survey(London: WGC, February 2026).

^[10] International Monetary Fund, World Economic Outlook: April 2025 (Washington, DC: IMF, 2025). GDP at purchasing power parity.

^[11] BRICS Council, ‘De-Dollarisation in BRICS: Strategic Ambition or Practical Gradualism?’, Analytical Report, 10 March 2026.

^[12] Watcher Guru, ‘BRICS De-Dollarization in 2026: Turning Point for Global Dollar Use’, 13 January 2026; see also Academic Jobs, ‘BRICS 2026 Summit Prep: De-Dollarization Strategies’, 17 January 2026.

^[13] S. Jaishankar, remarks at the Royal Institute of International Affairs, Chatham House, London, March 2025. Quoted in Lowy Institute, ‘A Reality Check for BRICS and the Lofty Dedollarisation Agenda’, The Interpreter, 18 November 2025.

^[14] US Department of the Treasury, ‘Debt to the Penny’, TreasuryDirect.gov, accessed January 2026. See also OnlineGold.org, ‘Central Bank Gold Reserves 2026’, 17 February 2026, which cites the $36 trillion figure and $1.8–2.2 trillion annual deficit range.

^[15] Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (Oxford: Oxford University Press, 2011), p. 2. The phrase is attributed to Valéry Giscard d’Estaing, French Finance Minister, c. 1965.

^[16]New Development Bank,General Strategy 2022–2026(Shanghai: NDB, 2022). The strategy targets 30% of financing commitments in member-nation currencies.

Bibliography

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