No, the USD Isn’t Doomed — And the Euro Won’t Replace It Part 1/2

Peregrine
May 4
2 min read

Every few years, markets panic over the “end of the U.S. dollar.” This time, tariffs are the supposed tipping point. But here’s the truth: the USD isn’t collapsing — and its most frequently mentioned challenger, the euro, is even less fit to take the throne.

Let’s break it down with hard facts, not media noise.

Part 1: Why the USD Isn’t Doomed

The U.S. dollar remains the bedrock of global finance — tariffs, deficits, and debt concerns don’t erase that overnight.

Global Reserve Status

~60% of global foreign exchange reserves are held in USD (IMF COFER data).
Euro: ~20%, yuan: ~2.3%, yen: ~5.5%.
Central banks need dollars to manage reserves and service dollar-denominated debt.

Global Trade Anchor

~88% of global FX transactions involve the dollar (BIS Triennial Survey 2022).
Commodities (oil, gas, metals) are still priced in USD. Even non-U.S. trade often routes through dollar clearing.

Massive Capital Flows Into the U.S.

As of April 2024, foreigners hold ~$33 trillion in U.S. assets (Treasury TIC data).
Tariffs shuffle goods flows, but capital flows keep the USD in demand.

No Real Challenger Yet

China’s yuan is kneecapped by capital controls.
Gold and crypto are too volatile.
The euro? It’s a structural mess — as we’ll cover next.

U.S. Economic Depth

U.S. GDP: ~$28 trillion (~25% of global GDP).
Unemployment: ~3.8%.
ISM Manufacturing PMI rebounded to expansion (April 2024, 51.3).

The real threat to the USD isn’t tariffs — it’s fiscal mismanagement. But even with high debt, foreigners still trust Treasuries over anything else.

Part 2: Why the Eurozone Won’t Replace the USD

Some pundits suggest the euro could step up. Reality check: the eurozone is a half-built monetary union riding on political duct tape.

One Currency, Many Diverging Economies

Germany ≠ Greece. Finland ≠ Italy.
ECB sets rates for all 20 eurozone members — “one-size-fits-none.”
Pre-2008, ECB policies overstimulated bubbles in Spain/Ireland; post-crisis, it over-tightened.

Debt Crises Made Worse by the Euro

Greece: GDP collapse (-26%), unemployment 27%, youth unemployment 60% at peak.
Italy: near-zero growth for 20+ years, debt/GDP ~140%.
No monetary sovereignty → no devaluation escape hatch.

Imbalance That Benefits Germany

Germany runs a ~7–8% current account surplus; periphery nations run deficits.
The euro acts as an export subsidy for Germany — the rest struggle.

No Fiscal or Banking Union

No eurobonds, no federal transfers, no shared banking backstop.
Italian and Greek banks remain national liabilities.

Loss of Sovereignty, Rise of Populism

Countries can’t print money, set rates, or devalue.
Political backlash everywhere: National Rally (France), AfD (Germany), Brothers of Italy, Vox (Spain).

Without the euro, countries like Greece and Italy could have devalued and recovered, just as Iceland did after 2008.

Conclusion: Why the Dollar Wins by Default

The eurozone’s flaws make it unfit to challenge the dollar. Tariffs, deficits, and political noise may dent U.S. credibility, but they don’t erase the dollar’s: