> It's a popular idea that dollars and euros derive their value because taxes are paid in that currency, or because it's backed by the state's military power.
The USD derives its value from an extraordinarily productive and innovative economy, that has led the world for a century, and has been the world's largest economy since the 19th century. The US economy has been highly functioning, and remarkably consistent on an averaged out basis, for approaching 200 years, more so than any other major economy. Venezuela's problem is precisely that their economy ceased to function properly, and its currency followed in line.
The US military exists solely because of that successful economy. One must inherently go before the other. US wealth and economic primacy did not originate from military strength, it originated overwhelmingly from trade, commodities, industry, invention during the 19th century. The US military was barely a third rate power when the US economy became the world's largest circa ~1890.
If military power played an outsized role in determining economic outcomes today, North Korea would be rich. Saddam's Iraq would have been incredibly affluent. Soviet Russia would have ruled the world economically. And Canada today would be bankrupt, as would Norway, Finland and Sweden. Japan would have wilted after WW2, instead they witnessed one of the greatest economic recoveries and booms in world history, almost entirely sans military; their boom wasn't because of Japan's ability to project military power. The US economy would not wilt if the US spent $450 billion (~2.3% of GDP) instead of $700 billion (~3.4% of GDP) on its military - the economy would benefit in fact, by redirecting resources to superior productive uses.
> What happens to the dollar when public consensus, trust and collective belief is weakened?
That has been a fantasy premise for about 3/4 of a century now. The Yen was going to crush the dollar. The Euro was going to overtake the dollar. The Yuan is going to crush the dollar. Meanwhile, dollar dominance is as strong as it has ever been. The US economy chugs forward, adding $600 to $800 billion a year in new economic output, still one of the core leaders in innovation and productivity. Venezuela's failure was one of State corruption and oppression, destroying any semblence of a functioning economic system, it's not because they needed a bit more military might to project with.