There’s an old adage when discussing politics, usually said to cut through all of the noise: “People vote with their pocketbook.” Given the myriad issues that encircle political discourse in America, the saying goes that there’s one issue above all, the economy, which ultimately determines which way the populace swings. While this may be an overly simplistic view of politics, its general premise is undoubtedly true. A person may be completely oblivious to foreign policy, healthcare policy or climate policy, but is acutely aware of his or her month-to-month financial plight. As a result, a politician engenders a ton of goodwill if the public perceives said lawmaker as having a financially strong agenda. Positive economic news can create a buffer of sorts in politics, allowing an elected official to swat away concerns in other areas. While the economy is a determining factor in how many people vote, in America, there’s a curious way the media often frames it. In the punditry class, there is a notion that the economy exists in a vacuum, and areas such as foreign policy or social policy occur in separate worlds. Our media often refuses to connect the dots or present our political landscape in a coherent manner, so issues are discussed in a discrete fashion, as if each is in its own separate container. This creates an incomplete, sloppy, one-dimensional analysis that treats the economy as a game of pure numbers, free from morality and unaffected by individual issues. On this note, there is one recent alarming economic indicator that is a harbinger of far more than simple economic distress. According to the most recent reports in July, the value of the U.S. dollar has declined by 11% so far this year. The dollar ended the first half of the year with its biggest loss since 1973 and marked the conclusion of a structural bull cycle for the dollar, which started in 2010 and ended in 2024 with an accumulated gain of about 40%. According to Morgan Stanley Research (MSR), the decline is expected to continue, with MSR predicting up to possibly 10% more in losses in the value of the dollar by the end of 2026. As a Morgan Stanley research paper from August of this year details, “The U.S. currency depreciation could have significant impacts for consumers, businesses, investors and ultimately for the overall economy. It would be more expensive for Americans to travel abroad. U.S. assets could be less compelling for foreign investors. Import prices could rise, putting pressure on inflation. The consensus after the 2024 election of U.S. President Donald Trump was that another period of U.S. growth outperformance was about to begin, with strong economic expansion, continued capital inflows and outperformance of U.S. equities and the dollar. That view changed in April after announcements about tariffs and the subsequent policy and economic uncertainties. Increasing worries about growth, inflation and public debt added negative pressure on the greenback. The U.S. dollar index lost almost 7% from the beginning of April to the end of June.” Since the Bretton Woods Agreement in 1944, the U.S. dollar has been the world’s foremost reserve currency, meaning that it is held by foreign governments, central banks and other monetary authorities as part of their foreign exchange reserves. According to the Atlantic Council, 54% of world exports were denominated in dollars in 2023, though the U.S. accounts for about a quarter of global GDP. Further, according to the International Monetary Fund (IMF), about 60% of all bank deposits are denominated in dollars, while nearly 70% of international bonds are quoted in the U.S. currency. Meanwhile, 57% of the world’s foreign currency reserves — assets held by central banks — are held in dollars. The U.S. dollar hasn’t been the world’s reserve currency by some law of nature, but for obvious reasons. For decades, the world had largely unwavering confidence in the U.S. economy, financial THE DOTS OF RECKLESS POLICY CHOICES EVENTUALLY CONNECT By Mark Anderson, Legal and Legislative Assistant, NMBA 14
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