Financial market participants and policymakers seem unaware of how fragile the global monetary order has become. The United States continues to undermine the independence of the Federal Reserve, public debt in industrialised countries is soaring, and cryptocurrencies such as stablecoins are being pushed into the market for fiscal reasons – although they lie largely outside central bank supervision.

These instruments fuel demand for government bonds, which governments welcome. Yet the consequences for global financial stability are profound, and the foundation of trust underpinning the system has already developed deep cracks. A seemingly minor event could now trigger a crisis.

Few actors seem to appreciate that money is a construct sustained solely by collective trust. States and central banks guarantee its value through the rule of law, reliable institutions, and a disciplined monetary policy that keeps inflation under control. Money as we know it has no intrinsic value and resembles a belief system more than a commodity.

This trust is being eroded by public debt policies, and by attacks such as those made by US President Donald Trump on the central bank. The rush into silver, gold and cryptocurrencies is a warning sign, a declaration of mistrust in the traditional state controlled monetary system. The position of the US dollar as the world’s reserve currency is less secure than it was even a few years ago. Its share in the global currency system has fallen to 56.3 percent, the lowest level in three decades, while the Chinese renminbi is gaining ground. US economist Kenneth Rogoff speaks of the dollar being in the „late Middle Ages“ of its dominance.

If an external shock were to strike the United States now, the world could slip into a deep currency crisis. There is growing concern that the current artificial intelligence boom might play this role. The enormous investments being made are justified only by expected future returns, and forecasts are running far ahead of reality. Financing structures contain self reinforcing elements and utopian visions of technological salvation. The parallels to the dotcom bubble are striking.

In addition, AI companies are far more interconnected than dotcom firms ever were. This makes it difficult to see where risks are concentrated and who is most exposed. What securitisations were during the financial crisis are now cross holdings, large money flows, purchase commitments, and layered financing vehicles that extend deep into the crypto sector. Because this sector is largely unregulated, it poses a risk of its own, particularly since panic and herd behaviour would be almost impossible to stop in fast moving digital markets.

Before the financial crisis, investors still believed industry assurances that everything was under control. That trust was abused, and a firewall of new regulations was built in response. The fact that these safeguards have already been weakened in the United States, while cryptocurrencies have been given almost free rein, should be a cause for concern.

Calls for deregulation are growing louder in Europe as well. But it would be a mistake to rely on the responsible behaviour of the herd rather than on strong institutions. During the financial crisis, many were surprised by how quickly the US housing downturn spilled into Europe, and how quickly the eurozone crisis followed. A regulatory firewall remains necessary even if it means domestic institutions forgo some returns. Money is simply codified trust. When people sense that the monetary order is no longer upheld and their trust has been violated, a currency crisis can set everything ablaze. Those who endure behind a firewall will be the fortunate ones.