The US dollar has continued to remain the world's premier currency since the 1970s. This article argues that this dollar `hegemony' has been exploited by the US which is an unhealthy trend. It also examines if the current recession will pave way to end the dollar hegemony.

A general relaxation of capital and foreign exchange control in the context of free-floating exchange rates made speculative attacks on the exchange rates of currencies a regular occurrence. The above mentioned three developments paved way for the dollar hegemony in the 1990s. These developments enabled the US economy to grow rapidly at the cost of other economies around the world. This phenomenon was also supported and fuelled by the demolition of erstwhile USSR into the Commonwealth of Independent States (CIS). The USSR was earlier a potential threat to the US supremacy.

After these developments, all the central banks across the world have been forced by the US administration to hold more dollar reserves than they actually might need to ward off sudden speculative attacks on their currencies in financial markets. Henry CK Liu argues that `dollar hegemony' prevents the exporting nations from spending the dollars that they earn from US trade deficit domestically. These countries are instead forced to finance the US capital account surplus, thus shipping real wealth to the US in exchange for the privilege of financing US debt to further develop the US economy.

Portfolio Organizer Magazine, Dollar Hegemony, Dollar Diplomacy, Commonwealth of Independent States, CIS, Financial Markets, US Commercial Investments, World War II, US Financial Assets, International Market, US Monetary System, Economic Crisis, Financial Crisis.