Stories of De-Dollarization and US Empire Decline
June 3, 2026
Image by Quilla.
Promoters of US empire decline make the claim that the world is de-dollarizing, the dollar is losing its role as the standard currency of international trade. If this were to happen, other countries would dump their trillions in foreign reserves, foreign loans would no longer be primarily made and repaid in dollars, nor would international trade take place primarily in dollars. Other countries would lose interest in investing in US bonds, such as Treasury bonds; the world banking system would slip out of US control; US economic sanctions and blockades on countries would lose their coercive impact. This would cause a clear drop in our standard of living, since the dollar would lose much of its buying power. De-dollarization would threaten the US empire’s survival.
Michael Hudson, Richard Wolff, Ben Norton, and Radhika Desai (“The dollar system is collapsing under the weight of its own contradictions”) all claim de-dollarization is well underway, and will end with economic ruin. However, there is very little evidence for de-dollarization happening, nor would de-dollarization cause the end of the present US system.
Advocates of US empire decline note various economic factors related to de-dollarization. First, the US as a world economic powerhouse has seriously weakened, particularly in relation to China. Second, countries are turning away from the dollar as the currency for international trade. Third, the US national debt is becoming a weight that is sinking the economy.
1. Declining Role of the US in the World Economy vis-à-vis China
The US Gross Domestic Product as a share of the world economy has shrunk considerably since the end of World War II when 50% of world production came from the US. This fell to 40% in 1960 and to a low of 21% during 2011-2014. Since then, it has increased to the 24-26% share range. This was the US share in 1979, and in 1995 at the heyday of US power in the unipolar world, when Russia and China were minor players. Since 1979, almost half a century has passed, and no relative US economic decline as measured by its world share of GDP is evident.
However, note that one-fifth of US GDP today comes from healthcare spending, which is greatly overpriced and exaggerates the size of the US GDP. US health care expenditure as percent of GDP was 5% in 1960, and is now 18%. In Europe today the average is 10-11%, and China, 7%.
China’s share of world GDP is 20%, less than the US. But if we use the Purchasing Power Parity measure of GDP, China’s world GDP share is 19.8%, and the US drops significantly from 26% to 14.5%.
In terms of total global manufacturing output, China’s share now almost doubles the US (28-30% vs 17%). In 1970, the US share of global manufacturing amounted to 29%. The US industrial base in relation to the world has clearly declined, but it is false to assert that the US has deindustrialized, as Michael Hudson often claims. It is the number two power and will remain so.
We should also not confuse a drop in US share of global manufacturing output with a drop in US manufacturing. And it has not dropped. The US industrial production index stood at 37 in 1970 (with 2017 =100). Today it is 102, producing almost three times as much as in 1970. That shows the US is not deindustrializing; it is the number of workers in manufacturing that has dropped dramatically. For instance, US steel production peaked at 130 million tons in the mid-1970s, has totaled 80 million tons annually since 2015 (while China produces about 1000 million tons), but the number of steelworkers has fallen from just under 500,000 to about 80,000 today.
The annual rate of economic growth may be a better measure than the world share of GDP for comparing the US and Chinese economies. The US economy grew 3.3% annually between 1980 and 1990, 3.5% between 1990 and 2000, 1.8% between 2000 and 2020, and 2.4% between 2020 and 2025. During most of these years, China’s GDP grew in the 9% range annually through 2015, and 5.5% annually since 2021. We can expect China to continue to expand its economic power relative to the US.
On the other hand, US world financial domination remains unthreatened. Lenin pointed out that imperialism involves the concentration of finance capital with production capital, with leading banks and monopolies controlling the global economy. Finance capital dominates, with the export of capital more essential than goods produced. However much US productive output has diminished relative to China, the US, not China, maintains world financial control – along with predominant military power, which enforces financial control.
The US has about 800 military bases around the world, enforcers of US economic and political control. China has one, Russia about ten. Even more than its military power, the US media control is unequaled in the world. This media power is geared toward molding our understanding of events based on the information and disinformation it provides. US media control serves as a prime “regime change” tool. It can even manipulate the thinking of people on the left, who claim they know the US media lies. It made them believe that Syria used chemical weapons on its people, or that Trump colluded with Putin to steal the 2016 election. Russia and China have almost no weight in the world media.
In sum, there have been some signs of a slow decline of US world economic power, but nothing that heralds a change in the status quo.
2. Decline of the Dollar as the International Currency
Talk of de-dollarization runs up against the facts that first, the dollar continues to make up more half of the currency held in countries’ foreign reserves; second, half of the total value of international currency usage is in the dollar; third, the dollar remains most widely used in international currency exchanges; and fourth, half of the exchanges between international banks are made in dollars. There is very little de-dollarization.
According to the International Monetary Fund, as of the third quarter of 2025, the U.S. dollar makes up 57% of global foreign exchange reserves, being the different currencies each country maintains in its major banks. This makes the dollar the world’s most commonly used currency for international trade and savings. Thirty years ago, in 1995, at the height of US power in the unipolar world, the dollar constituted 59% of international reserve currencies. It has been as low as 47% (1990) and as high as 71% (1999), when European countries were switching their national currencies to the Euro. Today the Euro remains a distant second reserve currency, making up around 20% of the total; China’s RMB makes up just 2% of international reserves.
Talk of de-dollarization conflicts with the reality that the dollar retains its previous stature as the accepted international reserve currency.
The US still oversees the world financial or international banking system. This system includes countries’ national or central banks, multinational financial institutions (e.g., Bank for International Settlements, International Monetary Fund, World Bank Group, international development banks), and private commercial banks. These operate through the US controlled SWIFT system, the Society for Worldwide Interbank Financial Telecommunication. About 90% of all world currency transactions and trade run through the SWIFT system. This system gives the US power to block transactions between countries. This is a key instrument to enforce unilateral coercive measures – sanctions – and disrupt the international trade of other countries.
In terms of the total value of international currency usage, in 2014, the dollar had a 52% share. Today, 12 years later, it amounts to 51%, also showing no sign of de-dollarization.
The Bank for International Settlements (BIS) records the dollar share of foreign exchange transactions, the percent of time the dollar was one of the two currencies used in a conversion between any two currencies. This we do, for instance, when we travel to another country. In 1990, 90% of the time one of the two currencies was the dollar, meaning almost half the time one currency is being exchanged is the dollar. Today, 35 years later, it is 89%. There is no sign of de-dollarization here either.
SWIFT also records the currencies used for international bank transfers. The dollar has become the primary currency. In 2012 it was the currency used in bank transfers only 30% of the time. The Euro was used 43% of the time. The dollar is now used 49% of the time, entirely at the expense of the Euro, which shrunk to 23%. Here there is a dramatic re-dollarization, not de-dollarization.
China has challenged the US-dominated world financial system by making $2.2 trillion in foreign loans and grants between 2000-2023, typically on more favorable terms than the imperial West does. Nevertheless, the Brookings Institute finds 64% of world debt remains denominated in dollars; the Federal Reserve states this level has stayed the same since 2010.
It is true that countries are de-dollarizing by holding their reserves less in dollars and more in gold. Gold makes up about 25% of all global foreign reserves, the highest level since 1995. Russia and China bought most of the increase in gold since 2000, largely a result of international economic instability and US use of the dollar as a weapon. The US still holds the most gold, more than the next three countries combined (Germany, Italy, France – Russia and China rank 5 and 6). Most of the value of the increase of gold reserves comes from the rising price of gold, not by countries adding to the quantity of their gold (see Fig. 3) Gold has risen in price because it is seen as a safe place during economic uncertainty, largely created by the US.
De-dollarization has also occurred with the moderate decline of the petrodollar (the world must buy oil from oil producers in dollars). Since 2010, when almost all oil was sold in dollars, it has dropped to about 80%. This is largely due to US sanctions on Russia, Iran, and Venezuela, which have prevented them from selling their oil in dollars. However, in 2026 the percent sold in dollars has gone up, since the US now sells Venezuela’s oil in dollars, has recently lifted some sanctions on Russia, and because of the US-Israeli war on Iran, the world is now more dependent on dollarized US oil and gas.
3. US National Debt
The US government debt is now $39 trillion. In 2015, it was $18 trillion, meaning it has doubled in ten years. The debt now amounts to 16 months of US GDP. How economically dangerous is this? Now the US government has to pay out over $1 trillion a year in interest on this debt, a serious drain. This is near the amount usefully spent on Medicare coverage for 67 million people.
For comparison, the total US household net worth is over $175 trillion, more than 4.5 times the national debt. (Total household debt is just under $19 trillion, 70% of it being mortgages). On a practical level, if we choose a safer investment than the stock market and buy a $1,000 US Treasury bond, this increases US debt by $1000. Treasury bonds pay over 4% interest, about the same rate as a CD, and earn more than checking or savings accounts. Nobody would say a Treasury bond is not a safe investment.
Most of the $39 trillion debt is not foreign-owned. The federal government owns 20%, making it money the government owes itself. More than 45% is owned by US savers, pensions and financial institutions, which hold Treasuries for the safety and interest yield. About 25% is held abroad, the same level as 20 years ago, before the world economic crisis the US created in 2008-9. Ironically, after that US crash, the foreign share of the US debt went up since the dollar is considered a safe investment in times of global economic problems. Today, foreign investors may unload their dollars if US inflation rises faster than in other countries. However, the rate of inflation remains 3-4% at present. The period of highest inflation for the dollar was almost half a century ago.
The US debt is not like that of other countries, since Washington is able to print dollars without backing it up by corresponding new productive output or material wealth, and not cause inflation. How can the US get away with this? Long been the stable international reserve currency, it is considered a reliable store of value. Countries also need dollars for their foreign trade and to pay most of their foreign public and private debt, estimated to be $76 trillion ten years ago. Consequently, the dollar will continue to be in high demand.
Nevertheless, there is unease around the world about the large US debt, the dollar, and the stability of the US political system. The problem is there is more unease with the alternatives. To state that the US has de-industrialized is false; this is true only in comparison with China, not in relation to Europe or elsewhere. Any de-dollarization happening is at a glacial pace; it misleads people into thinking it is happening in front of our eyes. Make note that Marxist economist Ernest Mandel wrote Decline of the Dollar – back in 1971. That is more than half a century ago – de-dollarization has long been a popular leftist just-so story. And it misleads people to think the US rulers are unable to reverse it. To claim the US empire and the dollar will somehow collapse seriously miseducates people. It can only end after an extended struggle against the US ruling class by tens of millions or more both inside the US and outside, one that establishes an entirely new and much more humane, egalitarian system. Very few on the left see that light at the end of the tunnel.
