Description

In this report, Julius Sen examines the "weaponization of the US dollar" and its profound implications for smaller countries. The author argues that the United States can leverage the dollar's central role in the global financial system as a powerful tool of economic warfare. By controlling access to dollar-based transactions and the SWIFT payment system, the U.S. can enforce its foreign policy objectives extraterritorially, creating significant vulnerability for nations that depend on the existing global economic architecture for trade, investment, and finance.

The paper explores the defensive policy options available to smaller, developing countries that feel exposed by this new reality. These measures represent a significant retreat from decades of globalization and include diversifying currency reserves away from the dollar, reintroducing capital controls, stockpiling precious metals, and pursuing self-sufficiency through protectionist trade and industrial policies. Sen concludes that while these actions may be necessary for self-preservation, they come at a huge cost, likely leading to a more fragmented, less efficient, and higher-risk global economy. This could result in a disorderly restructuring of domestic economies and the formation of new strategic alliances that operate outside of established international frameworks.