Aggressive U.S. sanctions are currently cutting the global lifespan of the dollar's dominance in half.
Harsh financial penalties are forcing international borrowers to move toward non-U.S. lenders to protect themselves. This has created a 15-year half-life for the jurisdiction of the U.S. dollar in global credit markets. We often assume that the dollar's status as a reserve currency is a permanent shield for American interests. In reality, using that power as a weapon is exactly what is causing other nations to abandon it. The more the U.S. enforces its rules, the faster it loses the ability to enforce them in the future.
The Limits of Unilateral Financial Enforcement
SSRN · 4836968
The centrality of the U.S. dollar allows the U.S. to impose sanctions and project influence abroad, but unilateral enforcement may shift financial activity outside U.S. jurisdiction. Using 7,085 enforcement actions against global banks during 2011–2022, I document that the U.S. levies 89% of all monetary penalties across 45 jurisdic tions. U.S. settlements raise funding costs, contract cross-border intermediation, and partially reallocate credit toward lenders outside U.S. oversight, even as bor