Photo taken on March 23, 2020 shows a US dollar banknote in Washington D.C., the United States. (Photo: Xinhua)

The American leaders have taken the dollar's hegemony for granted for too long and, if things don't change, they will end up being isolated from the rest of the world, warned Daniel Kowalski, an American businessman with interests in the USA and developing markets of Africa, in an article published on the website of the Foundation for Economic Education (FEE) on May 7.

The dollar as the world's reserve currency was established by the Bretton-Woods Conference in 1944 with its value directly connected to gold with one ounce costing $35. The gold standard ended in 1971, when President Richard Nixon suspended the convertibility of the US dollar into gold. Once the dollar was freed of its gold pegging, Daniel noted, politicians ramped up the printing presses to create money out of nothing and inflation soon became a major problem.

However, the US dollar still remained the world's reserve currency, Daniel explained, because "it still had a solid reputation, all international oil contracts were done in dollars, and there wasn't a strong rival".

He pointed out that the dollar's reputation as a safe haven is declining in the 21st century, since "the US inflation is a huge problem and the American government's debts have more than tripled".

Also, the wide-range sanctions imposed on Russia provided the impetus to its decline, he said. "Approximately $300 billion of assets that Russia had in banks worldwide have been frozen and this includes US dollars."

Worried that any assets they might have in US banks are not secure and can be confiscated on a whim, other countries are looking for an alternative, Daniel said, adding that "sanctions against Russia have made other nations wary about depending on the dollar and how the United States uses its currency to bend the will of other nations".

For instance, the BRICS are all searching for an alternative to the US dollar and, if they successfully create one, then it could potentially accelerate de-dollarization.

Daniel laid the blame on the American leaders who have taken their fortunate position for granted for too long. "They have lowered the value of the currency by spending too much, they impose restrictions on their own citizens that hurt their ease of doing business in the global market and they use their position of power to bully other countries into obeying their will."

History has proved that no global reserve currency retains its place forever. Daniel predicted that the dollar might not be dethroned overnight, but it could and would be a very gradual process.