Why the World Cannot Walk Away from the United States

The Anatomy of the Dollar Trap

In the mid‑twentieth century, as the Second World War drew towards its end, a small group of policymakers gathered in rural New Hampshire to design a new global financial order. Europe lay in ruins, Asia was devastated, and much of the world’s industrial capacity had been destroyed. One nation, however, emerged from the conflict not only intact but vastly strengthened. Its factories were running, its population was young, its infrastructure was untouched, and its military power was unmatched. From this moment, the modern international system took shape around a single gravitational centre: the United States.

More than eighty years later, headlines routinely declare that this era is ending. The rise of China, the emergence of the BRICS bloc, the shrinking relative share of the G7 in global output, and the sheer scale of American government debt are presented as evidence that the world is preparing to move on. The narrative is seductive. Empires rise, empires fall, and the United States, it is argued, is merely the latest to approach its twilight.

Yet the empirical reality is far less straightforward. Despite widespread political frustration with Washington, despite repeated predictions of dollar collapse, and despite active efforts by rival powers to build alternative systems, the global economy remains deeply anchored to the United States. Capital continues to flow into American markets. Global trade continues to be priced and settled overwhelmingly in dollars. American technology firms dominate the most critical layers of the digital economy. And when global risk rises, investors do not flee the United States — they flee towards it.

This is not a story of American virtue or flawless governance. It is a story of structural power. The modern international system has evolved in such a way that leaving the United States is not merely difficult, but prohibitively expensive. The world may wish to reduce its dependence on America, but the architecture of global finance, trade, technology, and security functions as a tightly interlocked cage. This is the dollar trap: a self‑reinforcing network of dependencies that even America’s adversaries must continue to sustain.

The Great Divergence: Why the West Is Fragmenting but America Is Not

It is now commonplace to note that the G7’s share of global GDP has declined dramatically over the past several decades. Once accounting for roughly half of global output, it now represents closer to a third. At first glance, this appears to confirm the narrative of Western decline and multipolar resurgence.

However, treating the G7 as a unified economic bloc obscures a critical development: the United States has been pulling away from its own allies. Since the global financial crisis of 2008, the American economy has diverged sharply from Europe and Japan. At the time of the crisis, the United States and the eurozone were economic peers of comparable size. Today, the US economy is nearly fifty per cent larger.

This divergence is not accidental. It reflects fundamentally different policy choices and economic structures. Europe prioritised regulatory expansion, fiscal caution, and — most consequentially — energy dependence on external suppliers, particularly Russia. This strategy collapsed abruptly in 2022, exposing deep vulnerabilities across European industry. Japan, meanwhile, has struggled with demographic decline and decades of low growth.

The United States pursued a different path. It allowed capital markets to remain deep and flexible, tolerated corporate concentration in the technology sector, and benefitted disproportionately from the rise of digital platforms. The largest American firms are not banks or utilities, but global infrastructures: operating systems, cloud platforms, semiconductor designers, and AI developers.

This divergence is visible in capital markets. European stock exchanges remain heavily weighted towards twentieth‑century industries such as banking, energy, and mining. American indices are dominated by companies that scale digitally, capture network effects, and operate globally with minimal marginal cost.

For institutional investors, this difference is decisive. A pension fund in northern Europe or East Asia looking to secure long‑term returns faces an unappealing domestic outlook: ageing populations, low productivity growth, energy insecurity, and limited technological leadership. By contrast, American markets offer liquidity, innovation, and relative energy independence. Capital flows accordingly.

The result is a reinforcing loop. As Europe and Japan stagnate, American assets become increasingly attractive by comparison. The United States does not need to outperform spectacularly; it merely needs to remain the least constrained option. In this sense, much of the narrative of American decline is better understood as a story of allied underperformance.

The Hidden Power of Financial Plumbing

Economic strength is not determined solely by headline GDP figures or stock market indices. Beneath the surface lies the plumbing of the global financial system: payment networks, settlement mechanisms, regulatory standards, and collateral frameworks. This is where American power becomes most visible — and most difficult to escape.

In early 2022, the United States and its allies froze hundreds of billions of dollars in foreign exchange reserves belonging to the Russian central bank. These assets had been accumulated through years of trade and were held in accounts that Russia believed it controlled. Within days, access was revoked.

The implications were profound. For policymakers across the developing world, this was a stark demonstration that financial sovereignty is constrained by the infrastructure one relies upon. The dollar was no longer merely a medium of exchange; it was a geopolitical lever.

In response, calls for de‑dollarisation intensified. The BRICS countries, now expanded beyond their original membership, argued that a new system was needed — one that allowed commodity‑rich nations to trade directly in their own currencies without passing through American financial institutions.

On paper, the argument is compelling. If Brazil sells agricultural products to China, why should a bank in New York be involved at all? If oil producers and manufacturers are aligned politically, why not bypass the dollar entirely?

The problem is liquidity.

The Impossible Trinity and the Limits of Alternatives

At the heart of the de‑dollarisation debate lies a fundamental constraint known in economics as the impossible trinity. A country cannot simultaneously maintain a fixed exchange rate, free capital movement, and independent monetary policy. Only two of the three are achievable at any given time.

The United States has chosen free capital movement and monetary independence. As a result, capital can flow in and out of American markets with minimal restriction, and the Federal Reserve sets policy based on domestic conditions. The trade‑off is a floating exchange rate that can be volatile.

China has chosen differently. It prioritises exchange rate management and monetary sovereignty, particularly to support export competitiveness and domestic stability. The consequence is strict capital controls. Large sums cannot leave the country without state approval.

This choice has far‑reaching implications. A reserve currency must be freely usable, transferable, and liquid across borders. Capital controls fundamentally undermine that function. A currency that cannot move freely cannot serve as the foundation of a global system.

Consider the practical consequences. A commodity exporter receiving payment in Chinese currency faces significant limitations when attempting to convert those funds into other currencies or deploy them globally. Markets for such conversions are shallow, spreads are wide, and political risk is ever‑present.

This is not merely an inconvenience; it is a structural barrier. A reserve currency is valuable not because it represents economic output, but because it offers immediate, frictionless optionality. The dollar’s dominance is rooted not in ideology, but in its unparalleled liquidity.

Despite repeated predictions of its demise, the dollar remains the primary currency for global trade finance. Alternatives exist at the margins, but none approach the scale required to replace it.

Collateral, Regulation, and the Debt Paradox

Beyond payments and trade settlement lies an even deeper layer of dependence: collateral. Following the 2008 financial crisis, global regulators imposed stricter rules on banks to prevent systemic collapse. These rules require institutions to hold high‑quality liquid assets that can be sold quickly in times of stress.

In practice, there is only one asset class capable of fulfilling this role at scale: US Treasury securities.

American government debt occupies a unique position. It is issued in enormous quantities, traded continuously, and backed by the world’s deepest capital market. As a result, it has become the primary form of pristine collateral underpinning the global banking system.

This creates a paradox. While political discourse often frames US debt as unsustainable, the global financial system is structurally dependent upon its expansion. If the United States were to dramatically reduce its debt issuance, banks worldwide would face a shortage of eligible collateral. Liquidity would dry up. Financial markets would seize.

In this sense, American debt is not merely a liability; it is a global public good. The more trade and finance expand, the greater the demand for US Treasuries becomes.

This reality also undermines fears of foreign holders destabilising the system by selling American debt en masse. Large‑scale liquidation would harm sellers at least as much as the United States itself, driving up their own currencies, damaging export competitiveness, and crystallising losses on their reserves.

The system resembles a form of mutually assured financial dependence. Any actor powerful enough to damage it would inevitably suffer the consequences.

Geography and the Limits of Power Projection

Financial dominance alone does not explain the resilience of American power. Beneath the abstract layers of capital flows and digital infrastructure lies a physical foundation that no other major economy can replicate: geography.

The United States occupies a uniquely favourable position. It is bordered by two vast oceans, enjoys friendly neighbours, and contains within its territory an extraordinary concentration of natural resources. It possesses fertile agricultural land, abundant fresh water, and — following the shale revolution — energy independence.

In an era of globalisation, these advantages are often taken for granted. But in a world of conflict, fragmentation, or disrupted trade, they become decisive.

China, despite its scale and industrial capacity, faces severe structural constraints. It imports the majority of its energy and a significant share of its food. Much of this trade passes through narrow maritime chokepoints that can be monitored or disrupted. Europe faces similar vulnerabilities, particularly in energy and raw materials.

The United States, by contrast, could theoretically close its borders and continue to feed and power its population. While living standards would decline, societal collapse would not follow. No other major economy can plausibly make the same claim.

This resilience explains why, in moments of crisis, global capital consistently flows towards American assets. Investors are not merely seeking returns; they are seeking survivability.

Technology, Chips, and the Control of the Future

Economic power in the twenty‑first century is increasingly determined by control over computation. Semiconductors underpin everything from artificial intelligence and telecommunications to military systems and industrial automation.

While China excels in manufacturing applications and consumer technology, it remains structurally vulnerable at the most advanced layers of chip production. Cutting‑edge semiconductors require extreme ultraviolet lithography — machines so complex that only a single company in the world can produce them.

Although that company is European, its technology stack is deeply entwined with American intellectual property and export controls. As a result, access to the most advanced manufacturing tools is ultimately subject to US approval.

Beyond manufacturing equipment lies an even less visible dependency: electronic design automation software. These tools are essential for designing modern chips and are dominated overwhelmingly by American firms. Without continuous updates and support, advanced chip design becomes effectively impossible.

Sanctions imposed in recent years have exposed the fragility of alternative technology ecosystems. Workarounds exist, but they are costly, inefficient, and fall behind rapidly. The gap between the technological frontier and sanctioned alternatives continues to widen.

In this sense, the United States does not merely host the world’s largest technology companies. It controls the production mechanisms of intelligence itself.

Security, Trade, and the Price of Order

Modern global trade relies on an assumption that is rarely questioned: the oceans are safe. Containers move across the world with minimal disruption, insurance costs are low, and shipping routes are predictable.

This is not a natural condition. For most of history, maritime trade was dangerous and heavily militarised. The current system exists because a single power has chosen to underwrite it.

Since the end of the Second World War, the United States has provided naval security for global shipping routes. This arrangement was initially part of a broader strategic bargain during the Cold War. Allies received access to protected trade in exchange for political alignment.

The geopolitical environment has changed, but the structure remains. When disruptions occur — whether piracy, regional conflict, or state‑sponsored attacks — it is American naval power that restores stability.

This creates a final, often unspoken dependency. The global economy is built on security guarantees that few other nations are willing or able to provide at scale. If those guarantees were withdrawn, the cost of trade would rise dramatically, supply chains would fragment, and economic integration would reverse.

Ironically, the United States is the only major power that could plausibly endure such a reversal. Others depend on the system for basic survival.

Culture, Language, and the Soft Infrastructure of Power

Beyond money, trade, and technology lies a subtler form of dominance: culture. The United States exerts extraordinary influence over global norms, aspirations, and intellectual frameworks.

English functions as the operating language of international business, science, aviation, and computing. The world’s most influential universities, research institutions, and companies operate primarily within an American or Anglophone ecosystem.

Global elites may criticise American policies, but they continue to educate their children in Western institutions, consume American media, and measure success using American benchmarks.

This cultural gravity produces a persistent brain drain. Talent flows towards the United States, reinforcing its technological and economic advantages. Attempts by rival powers to replicate this soft infrastructure have achieved limited success, largely because language, norms, and networks cannot be manufactured quickly.

The result is a final, nearly invisible layer of dependence. Even those who wish to escape American influence often do so using American concepts, tools, and platforms.

Conclusion: The Cleanest Dirty Shirt

The modern international system resembles a locked‑in equilibrium. The United States is not dominant because it is flawless or benevolent. It is dominant because it sits at the intersection of finance, security, technology, geography, and culture in ways that are mutually reinforcing.

The world may dislike aspects of this arrangement, but alternatives are fragmented, constrained, or incomplete. In moments of choice, capital, talent, and trust continue to gravitate towards the same centre.

This does not mean the system is permanent. History suggests that hegemonic powers rarely fall to external challengers. They collapse from internal division, institutional decay, and loss of legitimacy.

The dollar trap is real, but it is not unbreakable. Its weakest point lies not in Beijing, Moscow, or Brasília, but within the United States itself. If internal cohesion fails, the architecture may fracture.

Until then, the paradox remains. The world may want to quit the United States, but it has built a system in which doing so would mean tearing down the foundations of modern global life.