A world where the U.S. dollar is no longer king is a world that looks very different. More fragmented, less stable, and, according to seasoned observers, a whole lot more painful.
"De-dollarization is a structural shift in global demand for the dollar in reserves, trade and finance," J.P. Morgan's head of Global Macro Research, Louis Oganes, said in a recent note. This thesis means countries no longer feel safe relying on a currency controlled by Washington. And that shift is already visible in central bank reserves, commodity trade, and even bilateral settlements in Chinese yuan, Russian rubles, or Indian rupees. So yes, the dollar's grip is loosening, but don't expect that to happen quietly.
Brent Johnson, CEO of Santiago Capital and the mind behind the Dollar Milkshake Theory, spoke on the process in one of his recent YouTube videos. "The only way to de-dollarize is to delever—and de-leveraging means pain," he noted.
Contrary to the narrative that a falling dollar equals the U.S. losing power, Johnson sees the opposite: "Every time there’s a crisis, the dollar goes up, not down. That's when the squeeze begins."
As the dollar weakens, it means more liquidity, more leverage in the system. But the more the world tries to wean off the dollar, the more the dollar rises, suffocating global liquidity, triggering defaults, and feeding the very crisis that de-dollarizers want to escape.
Even Russian President Vladimir Putin has admitted it. After the West froze Russian dollar assets, he said the pain of losing dollar access is real, but necessary for independence. That's the price. And nobody said it would be cheap.
What Could Replace The Dollar?
Still, de-dollarization is not a fantasy, and J.P. Morgan notes two trends fueling it. First, the U.S.'s dysfunction—internal polarization, debt, and aggressive tariffs that alienate allies. Second, rising alternatives, such as China's push for yuan settlement and commodity trade pricing outside the dollar, are emerging. Add in a surge of gold-buying by emerging market central banks, and you get a clear signal: the world is preparing for a post-dollar era.
But here's the problem – no real challenger has emerged. The next reserve currency must meet three key criteria. First, it has to be large enough to absorb significant external demand. Then, it must be liquid and ultimately supported by a trustworthy and stable political system.
The challengers? The yuan? Not open enough. The euro? Too fractured. The BRICS' dream of a new currency? Mostly talk.
Trading Influence: Beyond The Dollar
So far, the most apparent signs of de-dollarization show up in commodity markets. "A large and growing proportion of energy is being priced in non-dollar-denominated contracts," J.P Morgan's Head of Global Commodities Natasha Kaneva pointed, clarifying that if countries like India, China or Brazil can buy oil in their currencies, it reduces the need for precautionary reserves for the U.S. dollar, freeing up the capital for growth-boosting domestic projects.
That's a seismic shift, especially if Saudi Arabia makes good on pricing oil in yuan. It’s not just ideology—it's incentives. And if the U.S. ever loses the dollar's reserve status? Well, President Donald Trump had something to say about that earlier this month.
“Losing the dollar standard would be like losing a war, a major world war,” Trump said. “I'm just saying, if people want to challenge it, they can,” Trump continued, “but they're going to have to pay a big price. And I don't think any of them are willing to pay that price.”
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