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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum
GLD 366.09-0.1%4:00 PM EST
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To: bull_dozer who wrote (200040)7/4/2023 11:23:07 AM
From: bull_dozer  Read Replies (9) of 217551
 
A bipolar currency regime will replace the dollar’s exorbitant privilege

The US dollar has been the predominant global reserve currency since the design of the Bretton Woods system after the second world war. Even the move from fixed exchange rates in the early 1970s did not challenge the greenback’s “exorbitant privilege”.


But given the increased weaponisation of the dollar for national security purposes, and the growing geopolitical rivalry between the west and revisionist powers such as China, Russia, Iran and North Korea, some argue that de-dollarisation will accelerate. This process is also driven by the emergence of central bank digital currencies that could lead to an alternative multipolar currency and international payment regime.

Sceptics argue that the global share of the US dollar as unit of account, means of payment and store of value hasn’t fallen much, despite all the chatter about a terminal decline. They also point out that you can’t replace something with nothing — as former US Treasury secretary Lawrence Summers put it: “Europe is a museum, Japan is a nursing home and China is a jail.”


More nuanced arguments point out that there are economies of scale and network that lead to a relative monopoly in reserve currency status, and that the Chinese renminbi cannot become a real reserve currency unless capital controls are phased out and the exchange rate made more flexible.

ft.com
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