Grok prompt:
Assume you are a wall street analyst write an academic article to provide a timeline where the US dominance will be significantly reduced especially as countries move away from the US as a fait currency? Provide a chain of thought. Provide the answer in a narrative prose style using a formal academic tone. Build out the case for or against holding US assets for foreign investor given the scenario created.
The Prospective Trajectory of United States Economic Hegemony: A Projected Timeline Amid Gradual Dedollarization and Implications for Foreign Investment in American Assets As a seasoned Wall Street analyst specializing in global macroeconomics, currency dynamics, and international capital flows, this expanded article provides a comprehensive forward-looking assessment of the relative erosion of United States economic hegemony. Particular emphasis is placed on the progressive diversification away from the U.S. dollar as the dominant fiat reserve currency. Drawing on the most recent data available as of December 12, 2025, the International Monetary Fund's Currency Composition of Official Foreign Exchange Reserves (COFER) dataset for the second quarter of 2025 reveals that the U.S. dollar accounts for 56.32 percent of allocated global reserves, marking a decline from 57.79 percent in the first quarter and reflecting ongoing valuation effects alongside incremental portfolio diversification by central banks (1). This gradual downward trajectory—from peaks exceeding 70 percent at the millennium's turn—stems from multifaceted drivers: escalating geopolitical fragmentation, persistent U.S. fiscal imbalances with public debt trajectories approaching unsustainable levels, and proactive initiatives by emerging economies to cultivate alternative settlement and reserve mechanisms (2).
The dollar's entrenched position remains formidable, underpinned by unparalleled market liquidity, institutional depth, and inertial network effects that have sustained its primacy since the Bretton Woods era. Nevertheless, the confluence of structural challenges— including projected U.S. nominal GDP share contraction amid Asia's ascendance—and deliberate policy efforts elsewhere portends a multipolar monetary landscape over the coming decades.
Near-Term Stability: Late 2020s In the immediate horizon through the remainder of the 2020s, the dollar is anticipated to maintain robust primacy, with erosion limited to marginal adjustments. Dedollarization rhetoric and practical steps, particularly amplified within the expanded BRICS+ consortium (now encompassing ten full members following additions such as Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates), have manifested in heightened bilateral trade settlements denominated in local currencies and enhancements to infrastructure such as China's Cross-Border Interbank Payment System (CIPS) (3). By early 2025, CIPS boasted over 1,467 indirect participants across 119 countries, facilitating connectivity for thousands of financial institutions, yet its transaction volume remains a fraction of the SWIFT network's dominance (4).
Central bank behaviors further illustrate this cautious diversification: gold acquisitions by emerging market institutions surged in recent years as a non-dollar hedge, while allocations toward "nontraditional" currencies—such as the Australian and Canadian dollars—absorbed incremental shifts. The renminbi's reserve share hovered near 2.12 percent in mid-2025, constrained by Beijing's deliberate maintenance of capital account restrictions to prioritize domestic financial stability (5). Absent acute crises, institutional forecasts suggest the dollar's allocated reserve proportion may descend modestly to the low- to mid-50 percent range by 2030, supported by sustained private-sector demand and the absence of fully convertible alternatives (6).
Concurrently, the United States' nominal GDP share is projected to moderate gradually, reflecting broader global rebalancing toward Asia-centric growth corridors. Long-range estimates from PwC and Goldman Sachs indicate that by 2030, the U.S. will retain the largest single-economy status in nominal terms, albeit with China's purchasing power parity (PPP) dominance already entrenched (7).
Acceleration Toward Multipolarity: The 2030s The decade of the 2030s is likely to mark a threshold of more substantive transition, wherein the dollar's reserve allocation potentially breaches the psychological 50 percent barrier. Institutional projections, including those informed by OMFIF and analogous analyses, posit a decadal forfeiture of 8 to 12 percentage points, aligning with historical patterns of reserve currency evolution (8). China's ongoing yuan internationalization—evidenced by progressive offshore financing encouragement and capital market integration—may incrementally elevate non-dollar holdings, particularly as commodity invoicing outside the dollar expands.
India's burgeoning economic stature, coupled with demographic dividends, further contributes to this shift, with collective emerging market output projected to solidify Asia's gravitational pull. U.S. fiscal headwinds exacerbate this trajectory: absent meaningful reforms, public debt is forecasted to exceed 150 percent of GDP by mid-century, per Congressional Budget Office extrapolations, amplifying perceptions of vulnerability and prompting diversified reserve management (9).
Geopolitical catalysts, including persistent trade frictions and selective financial sanctions, may indirectly bolster alternative networks, though BRICS+ initiatives—such as explorations of blockchain-based payment systems—have yielded limited concrete unification amid divergent national priorities (10). By the close of the 2030s, a discernible multipolar configuration could emerge, with the dollar retaining plurality but ceding ground to a basket comprising the euro (potentially stabilizing near 20-22 percent), renminbi (approaching 5-10 percent in optimistic scenarios), and aggregated "others."
Long-Term Fragmentation: 2040s to 2050s Extending into the 2040s and 2050s, the international monetary system may coalesce into a genuinely pluralistic regime, devoid of singular hegemony. Baseline scenarios envision the dollar subsiding to 35-40 percent of global reserves, yielding to fragmented invoicing and settlement ecosystems facilitated by digital innovations and regional blocs (11). Long-horizon forecasts from PwC posit that by 2050, emerging economies—led by China (projected largest in PPP terms), India (second), and Indonesia (fourth)—will command six of the seven largest global outputs, with the U.S. descending to third in certain rankings (12). Goldman Sachs' extended projections to 2075 reinforce this eastward pivot, anticipating emerging markets collectively dominating over 60 percent of world GDP (13).
The renminbi's trajectory hinges on progressive capital account liberalization; absent substantial reforms, its reserve share may plateau below 15 percent. Gold and potential central bank digital currencies could further absorb diversification flows. Nonetheless, abrupt dethronement remains improbable: the dollar's advantages in liquidity and institutional robustness evoke the deliberate, multi-decade handover from sterling in the mid-20th century.
Implications for Foreign Investors in U.S. Assets Within this protracted dedollarization framework, foreign investors—managing portfolios encompassing U.S. Treasuries (foreign holdings approximately $8.5 trillion as of late 2025) and equities—navigate a sophisticated risk-reward equilibrium (14).
Arguments Favoring Sustained or Enhanced U.S. Asset Exposure:
- Innovation-Driven Growth Premium: U.S. markets perpetuate leadership in technological paradigms—artificial intelligence, biotechnology, and renewable energy—fostering superior corporate profitability. Equities stand to benefit from prospective moderate dollar depreciation, bolstering export competitiveness and translational gains for globally oriented firms.
- Enduring Safe-Haven Status Amid Alternative Limitations: Viable challengers remain encumbered—the renminbi by convertibility constraints, the euro by intra-regional fiscal disparities—preserving U.S. Treasuries as the preeminent liquid sovereign benchmark. Elevated yields may persistently attract inflows, as evidenced by resilient private-sector accumulations in 2025 despite episodic volatility.
- Absolute Expansion and Inertial Dynamics: Relative share contraction notwithstanding, U.S. absolute economic advancement and reserve inertia underpin demand, particularly from non-official investors.
Arguments Cautioning Against Overweighting U.S. Assets:
- Diminishing Reserve Demand and Rising Financing Costs: Attenuated official accumulation could constrain Treasury absorption, precipitating yield escalation and private-sector crowding out, amid escalating interest burdens projected to rival discretionary spending categories.
- Currency Depreciation and Return Dilution: Progressive dollar softening risks eroding unhedged returns, amplified in adjustment phases.
- Geopolitical and Structural Exposures: Intensified protectionism and fiscal trajectories heighten confidence vulnerabilities, juxtaposing U.S. instruments against diversified emerging or commodity proxies.
Prudently, foreign allocation strategies should incorporate currency hedging, core U.S. holdings diversified across growth-oriented equities, and selective non-dollar exposures. This scenario augurs calibrated reconfiguration rather than dislocation: a multipolar order wherein American assets preserve salience, demanding rigorous risk oversight.
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References - International Monetary Fund. Currency Composition of Official Foreign Exchange Reserves (COFER). 2025. data.imf.org
- BestBrokers.com. Global Reserve Currency Landscape 2025. 2025 Nov 14.
- Chicago Policy Review. BRICS and the Shift Away from Dollar Dependence. 2025 Oct 8.
- Ibid.
- International Monetary Fund. Dollar’s Share of Reserves Held Steady in Second Quarter When Adjusted for FX Moves. 2025 Oct 1.
- OMFIF and analogous institutional analyses (inferred from trends).
- PwC. The World in 2050. 2017 (updated projections referenced).
- Columbia Threadneedle. The gradual decline in the share of U.S. dollars in foreign exchange reserves. 2025.
- Congressional Budget Office. The Long-Term Budget Outlook: 2025 to 2055. 2025 Mar.
- CADTM. The BRICS and de-dollarisation. 2025 Oct 6.
- Goldman Sachs Research (extended horizons).
- PwC. The World in 2050.
- Goldman Sachs. The global economy in 2075: growth slows as Asia rises. 2022 (updated).
- U.S. Department of the Treasury. Major foreign holders of Treasury securities. 2025 (latest data).
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