economy
March 5, 2026
Prof. Schlevogt's Compass No. 43: The Dollar Poison
By precipitating industrial erosion, the dollar’s supremacy undermines the foundational sources of American might
TL;DR
- The US dollar's world-reserve status has caused a long-term real appreciation, undermining the competitiveness of export-oriented manufacturing and pressuring domestic industries.
- This dynamic has structurally tilted the economy toward consumption rather than production, leading to falling manufacturing employment and a contraction in its share of GDP.
- Industrial hollowing-out, distinct from benign deindustrialization, signifies weakening domestic production linkages, waning ecosystem density, and diminishing industrial depth.
- Reserve-currency status functions as a sorting mechanism, channeling income toward finance and consumption in specific geographies while hollowing out globally competitive sectors.
- The structural elevation of the dollar disadvantages the tradable sector, redirects investment and talent toward capital-market activities, and weakens industrial capacity.
- Loss of industrial capacity means loss of strategic capability, including skills, process knowledge, advanced tooling, and institutional memory, hindering innovation and the ability to scale strategic industries.
- Industrial capacity is the material foundation of power, essential for building infrastructure, cultivating technological ecosystems, securing supply chains, and maintaining strategic autonomy, especially in the military sphere.
- Disruptions in critical supply chains have exposed strategic dependence, highlighting that efficiency and resilience are not synonymous.
- Industrial erosion leads to an economy that is impressive in headline growth and market valuations but fragile in fundamentals, with strategic dependence on foreign producers coexisting with rhetoric of economic prowess.
- The dollar's primacy converts monetary dominance into industrial decay, widening inequality and entrenching strategic dependence, leading to a diminution of national unity, economic autonomy, strategic resilience, and material leverage.
- Quiet industrial erosion has erupted into open populist revolt in America, as deferred national liabilities are finally presented.
- The article is Part 6 of a series on the global dollar.
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