美元的作用即将发生重大变化吗？（英）-2023

ASYMPOSIUMOFVIEWS

Istheroleofthedollaraboutto

significantlychange?

T

heinternationalfinancialmarketshavebeenfullofspeculationaboutthede-dollarizationof theworldeconomyinfavorofnewcurrencyarrangements,particularlyinvolvingtheChinese yuan.InMarchofthisyear,ChinesePresidentXiJinpingdeclaredhisdeterminationtocreateanewworldorderthatabandonstheWest’s“rules-basedorder”basedonBritishCommonLawin

favorofaChinese-ledorder.

Ofcourse,theimmediateresponseisthatayuan-basedcurrencysystemwouldbeunworkablewithoutBeijingrelinquishingcapitalcontrols,whichisunlikelytohappenunderthehyper-

centralizedcontrolofXi.Butarethereevenmorefundamentalproblemsintryingtobreakawayfromthedollarastheworld’sreservecurrency?

Underayuan-basedsystem,China’scommercialinteractionwithothernationswouldhavetobeunderChineserules.Meanwhile,CommonLaw,theWest’sdefined,reliablesystemdesigned

toprotectpropertyrights,wouldloseitstraditionalroleinglobalcommercialrelations.AsglobalanalystsHaraldMalmgrenandNicholasGlinsmanargue,“XiJinpingisessentiallyposingachoicefortheworldeconomy:TradeandcommerceunderthetrustgarneredforcenturiesfromCommonLawORtradeandcommerceunderXi’sLaw,ultimatelywiththeruleandjudgmentofoneman.”

SomeanalystsarguethatalackoftrustinXi’slawiswhySingaporeisnowwinningoverHongKonginthebattletobecomeAsia’sfinancialhub.TheyalsopointtotheMarch2022nickelcrisisontheChinese-ownedLondonMetalsExchangeinwhichtheChinesegovernmentintervenedduring

anepicshortsqueezetoprotectoneofitsfavoritecompanies.ManyglobaltradersnowbelievethataChinese-ownedorcontrolledmarkettradingplatformcouldnotbetrusted.

Soistalkofthede-dollarizationoftheworldmorethestuffofsimplisticjournalisticheadlinesandaresponsetoAmerica’ssoaringdebtandprolificuseofeconomicsanctions?Oristhedollar’sglobalroleabouttosignificantlychange?

Morethantwentyprominenteconomicstrategistsoffertheirthoughts.

14THEINTERNATIONALECONOMYSPRING2023

Countrieswillbe

forcedtochoose:

collaboratemore

tostrengthen

multilateralism,or

embraceeconomic

decoupling.

Wouldareductioninthedollar’susagebecostlyfortheUnitedStates?Thestakes

arefarlowerthanisgenerallyunderstood.

T

MOHAMEDA.EL-ERIAN

President,Queens’College,Cambridge

University,andProfessor,WhartonSchool,

UniversityofPennsylvania

hedollar’sroleastheworld’sreservecurrencyisnotunderthreatforthesimplereasonthatyoucannot

replacesomethingwithnothing.Thereisnoothersinglecurrency,physicalorvirtual,thatcansubstituteforthedollaratthecenteroftheinternationalmonetarysys-tem.Yetthisrealitydoesnotmeanthatthedollar’sglobalinfluenceisnotthreatened.Drivenbyacombinationofgeopoliticalandnationalsecurityconcerns,amultiplyingsetofsmallpipesarebeingbuiltaroundthedollaratthecoreofthesystem.

Thedollar’sdurableadvantagecomesfromthesizeanddynamismoftheU.S.economy,itsdeepandliquidfinancialmarkets,andthepredictabilitythatcomeswithrespectfortheruleoflawandmatureinstitutions.

Asimportantastheseadvantagesare,theirinflu-encehasbeenchallengedinrecentyearsbyagradu-alerosionoftrustinAmerica’sabilitytoresponsiblymanagetheglobalsystem,includingduetotheoriginsoftheglobalfinancialcrisis.Thishasbeencompound-edintheeyesofsomecountriesbyAmerica’sincreas-ingwillingness,forgoodreasons,toweaponizetrade,investment,andpaymentssanctions;aswellaswhatseemstobeRussia’shigher-than-expectedabilitytosidesteptheworseeffectsofthesanctions,albeitinacumbersomeandcostlyfashion.

Whatishappeningtotheinfluenceofthedollarisareflectionofalargerprocessoffragmentedglobaliza-tionasgeopoliticsandnationalsecurityhaveincreasinglysidelinedeconomicsinshapingbothnationalandinterna-tionaleconomicandfinancialrelations.

Aswelookforward,andasdetailedinmyrecentFinancialTimesarticle,“Slowlyandsurely,countrieswillnowbepushedtowardschoosingbetweentwostrikinglydivergentpaths:collaboratemoretostrengthenmultilater-alismanditsruled-basedframework,orembraceeconom-icdecouplingasaninevitableaccompanimenttogreaterriskmitigationbyindividualstates.”

JOSEPHE.GAGNON

SeniorFellow,PetersonInstituteforInternationalEconomics

D

oinvestorsandtradersprefertooperateunderthear-bitrarywhimsofanautocratorthelong-establishedrules-basedsystemderivedfromBritishand

Americancommonlaw?Thequestionanswersitself.

Afarmoreinterestingquestioniswhetherareductioninthedollar’susageinfavorofanothercrediblereservecurrencywouldbecostlyfortheUnitedStates.Inreality,thestakesarefarlowerthanisgenerallyunderstood.

DollardominancerestsonthelargesizeoftheU.S.economy,theglobalreachofU.S.firmsandbanks,thesoundreputationoftheU.S.judicialsystem,theU.S.commitmentstocapitalmobilityandinvestorprotection,andhistoricalinertia.Noothercurrencycomesclosetomatchingthedollar’slead,withtheeuroindistantsec-ondplace.

Butifthedollarandtheeuroweretoswitchplaces,fewpeopleinAmerica,Europe,ortherestoftheworldwouldevennotice.Internationaltradeandinvestmentflowswouldbeequallyfastandcheap.

Themostwidelycitedadvantageofdollardomi-nanceforAmericaisalowcostofborrowingindollars,butEuropeansalreadyenjoyalowercostofborrowingandthespreadbetweendollarandeurointerestrateswouldprobablyriseonlymoderatelyiftheeurobecametheprimaryreservecurrency.Theflipsideofthedollar’ssupposedlyexorbitantprivilegeisanoverlystrongdollarthatinflatesthechronicU.S.tradedeficit.AstrongereuroandweakerdollarwouldhelptonarrowlargeEuropeantradesurplusesandU.S.tradedeficits—aclearbenefitforglobalstability.

IntheWinter2020issueofTIE,IdescribedhowtheInternationalMonetaryFund,withthebackingofkeymemberstates,couldmovetheworldtoamoresymmet-riccurrencysystembasedonthespecialdrawingrightthatwouldretainindependentcentralbanksandfreelyfloatingnationalcurrencies.Icontinuetobelievesuchasystemisintheworld’sbestinterest.

Butwhataboutthedollar’sroleinfinancialsanc-tions?Dollarpaymentssystemsdoprovideachannelto

SPRING2023THEINTERNATIONALECONOMY15

enforcesanctions,butwould-besanctionsevadersalreadyhavewaystoroutepaymentsoutsidethedollarsystem.Theyarelessconvenientandbitmorecostly,butasmalltaxisnotasignificantdeterrentformostrogueactors.

Themainpowerofsanctionsderivesfromtheasym-metryinsizeoftheU.S.economyversusthesanctionedentity.Cuttingofftradeandfinancebetweenthetwoim-posescostsonbothparties,andtheseareeasiertobearforthelargerparty.Thisdynamicholdsregardlessofwhetherthedollaristheprimaryreservecurrencyoronlyasec-ondaryreservecurrency.

Theeffectivenessofsanctionsdependsfarmoreongainingalliestojointhem,thusshuttingoffthesanctionedentityfrommoreoftheworldeconomy,thanitdependsonthedollar’sshareofcurrencyusage.

ofsuccess.OfcoursetheChineseknowthis.ThatiswhytheChinesegovernmenthasareputation,amongcloseob-servers,forspeakingclearlyandcarefullyandformean-ingwhatitsays.WiththeBritish,it’stheoppositeandhasbeen“forcenturies.”TheFrenchdidnotcointhephrase“perfidiousAlbion”fornoreason.

Howfarwillde-dollarizationgo?Trustisnobigobstacle.CapitalcontrolsdonotpreventChinafromis-suingaglobalbond.Thesmallscale,shallowdepth,andsomewhatweakliquidityofthatmarket,atfirst,areitsmajordisadvantages.Someskepticismiswarrantedonthatground.

Bytheway,theChinesecurrencyisnot“theyuan.”It’stheRenMinBi(RMB)—thepeople’smoney.“Yuan”isthewordoneusestocountoutamoneysum.Bettergetitright.

Thedollarreliable?Huh!Chinaoffersareliableandlaw-basedalternative.

Chinawouldbe

thelargestloserinade-dollarizedworld.

JAMESK.GALBRAITH

LloydM.Bentsen,Jr.,ChairinGovernment/BusinessRelations,LBJSchoolofPublicAffairs,UniversityofTexasatAustin

I

n1995,inmycapacityaschieftechnicaladviser tothePeople’sRepublicofChina’sStatePlanning Commission,Irecruitedthelate,greateconomistRobertEisnerofNorthwesternUniversitytoaconferencenearBeijingoninternationaleconomicpolicy.MystrictconditionwasthathepersuadeourChinesehoststomain-taincapitalcontrols.Hesucceeded.Therestishistory.

Thenotionthat“BritishCommonLaw”—oranylaw—underpinsthe“rules-basedorder…designedtopro-tectpropertyrights”istoofunny.JustaskaRussianoligarchaboutthat!Andbeyondtheseizuresofprivateproperty—withoutanykindofdueprocess—thereisthe“freezing”ofcentralbankreserves.ThesearenotjustRussia’sbutalsoAfghanistan’s,Iran’s,andpotentiallythoseofanycountryfoolishenoughtoholdU.S.Treasurybondswhiledeviat-ingfromU.S.policies.That,ofcourse,ispreciselywhyde-dollarizationisunderway.“Reliable?”Thatwasthen.

WhatChinaoffersispreciselyareliableandlaw-basedalternative.Withoutthat,therewouldbenochance

ZONGYUANZOELIU

FellowforInternationalPoliticalEconomy,Council

onForeignRelations,andauthor,SovereignFunds:

HowtheCommunistPartyofChinaFinancesItsGlobalAmbitions(2023)

T

heU.S.dollar’sdominanceextendsacrosstherealms oftherealeconomy,funding,andinvestabilitywith- intheexistinginternationaleconomicsystem.ItisthedominantglobalreservecurrencyandenjoysthehighestweightintheSDRbasket.Itreignsastheleadinginvoicingcurrencyininternationaltradeandtheprimarycurrencyinglobalfinancialinfrastructure,andwieldssig-nificantpoweringlobalcommoditiespricing.Thedollardominatesdevelopmentfinancing,bankdeposits,corpo-rateborrowing,andequitymarkets.Italsoservesastheprimarysafehavencurrencyduringeconomicandfinan-cialcrises.Acrucialaspectunderlyingthedollar’sdomi-nanceliesinthedollar-basedinternationalmonetaryandfinancialrules,accountingstandards,anddisputeresolu-tionprocedures.Thedollar’sdominanceacrossthisbroadspectrumpresentsstructuralconstraintsforanyreactivede-dollarizationinitiative.

16THEINTERNATIONALECONOMYSPRING2023

Leadershipneedsfollowers,andtradingnationsneedcounterparts.PresidentXiJinpingcannotleadChinatounilaterallyde-dollarizetheexistingsystemandimposehisvisionfortheworldonothereconomies.Xi’sambi-tiontoleadanon-Westernworldorderfacesinternationalpushbacksandseveredomesticchallengesthatlimithiscapacitytorealizehisexpandingglobalambitions.WhileXicanattempttobroadentheuseoftherenminbiandex-pandthenetworkofrenminbi-basedfinancialinfrastruc-ture,hecannotleadChinatounilaterallypursuede-dol-larizationsinceinternationaleconomicactivitiesareexchangesthatrequireatleasttwoparties.Inthiscontext,coalitionalde-dollarizationinitiativesthroughregion-alandmultilateralframeworkssuchastheBRICS(andBRICSPlus)andtheShanghaiCooperationOrganizationcouldchallengethedollar’sdominance.

Expandingtheuseoftherenminbiintradeiseasierthanincreasingitsstatusasaninternationalreservecur-rency.Capitalcontrolsarenotnecessarilyadealbreakerforthebroaderadoptionoftherenminbiintrade,asChinaisalreadyatoptradingpartnerforover120countriesandtheChinesegovernmentiswillingtofacilitateexportbyprovidingtradefinanceusingtherenminbi.However,capitalcontrols,combinedwiththelackofrisk-freerenminbi-denominatedassets,therelativelyclosednatureoftheChinesefinancialmarket,andXi’spreferencefortheruleofonemaninsteadoftheruleoflawandmarketprinciplesfurtherobstructtherenminbi’sriseasaninter-nationalreservecurrency.

De-dollarizationisdifferentfromdethroningthedollar.NoChineseleadershaveopenlyexpressedtheirintentiontodethronethedollar.Chinawouldbethelarg-estloserinade-dollarizedworld,consideringthatmostofitsover$3trillionforeignexchangereservesarein-vestedinU.S.Treasuriesandthelion’sshareofChinesesovereignfunds’portfoliosaretiedtodollar-basedWesternmarkets.China’spursuitofanalternativefinan-cialsystemaimstoserveasinsuranceandhedging,re-ducingthecosttotheChineseeconomyintheeventofstringentsanctionsunderextremeconditions,suchasamilitaryconflictoverTaiwan.

Whiletherenminbiisunlikelytosoonreplacethedollar’sdominance,historyremindsusthatthedollar’sdominanceisnotguaranteedforever.De-dollarizationisaseculartrendinvolvingtheaccumulationofmanyin-crementalinitiativestoencouragenon-dollarexchanges.Unfortunately,thecombinedforcesoftheU.S.govern-ment’sexcessiveuseofsanctions,itsswellingdebts,andtheincreaseinthefrequencyofthedebtceilingdebateaccelerate,ratherthandiscourage,thede-dollarizationalignment.Theprocessofde-dollarizationisunlikelytobepunctuatedbysweepingpoliciesaspartofagrandde-dollarizationstrategythatmarksarecognizableinflec-tionpointleadingtotheendofthedollarhegemony.

Idoubtwe’llsee

theinternational

peckingorder

overturnedin

ourlifetime.

STEVENB.KAMIN

SeniorFellow,AmericanEnterpriseInstitute,

andformerDirector,InternationalFinance,Federal

ReserveBoardofGovernors

F

uturechangesintheglobalroleoftheU.S.dollarwill beevolutionary,notrevolutionary,andIdoubtwe’ll seetheinternationalpeckingorderofcurrenciesover-turnedinourlifetime.Tobesure,theshareofthedollaringlobalforeignexchangereserveshasedgeddownoverthepastcoupleofdecades,from71percentin1999to58percentattheendoflastyear.Butconsideringthemomen-touschangesintheglobaleconomysincethatperiod,in-cludingthecreationoftheeuroandtheriseofChina,thatdeclineisnotallthatsurprising.Andshareofthedollaringlobalreservescontinuestooutstripthatofitsnearestcom-petitors—theeuro(20percent),yen(6percent),sterling(5percent),andChineseyuan(3percent)—byhugemargins.Thedollar’scontinuedpredominancemayinpartreflectnetworkeffects.Onceacurrencyisestablishedasapreem-inentfinancialvehicle,itisdifficulttodislodge.Butitalsoreflectsamultitudeofstrengths:alargeanddynamicecon-omy;stronginvestorprotectionsandtheruleoflaw;andtheworld’slargest,safest,andmostliquidgovernmentbondmarket.Certainly,thepoliticaldysfunctionsinWashingtonthatledtothedebt-ceilingfracasthisyearthreatentoun-derminethesestrengths,butsofartheyhavefailedtodoso.

Allthatsaid,itseemslikelythatthedollar’spredomi-nancewillexperiencefurthererosionintheyearstocome.Partofthaterosionmayreflecteffortsbyinternationalre-servesmanagerstooptimizetheirportfolios,alongwithnewfinancialtechnologiesmakingiteasiertotradeawiderangeofcurrencies.Morespeculatively,innovationsinfi-nancialtechnologythatreducethecostandincreasethespeedofcross-borderpayments,possiblyincludingtheinter-operablecentralbankdigitalcurrenciescurrentlybeingexploredbytheBankforInternationalSettlements,mayreducetheneedtousedollarsforbilateraltransac-tionsbetweennon-U.S.economies.Thismightnotsub-stantiallyreducethedollar’sdesirabilityasaglobalstoreofvalueinthenearterm,butcouldexertdownwardpres-sureonthedollar’sshareofreservesovertime.

SPRING2023THEINTERNATIONALECONOMY17

Finally,wideninggeopoliticalriftsbetweenEastandWestwilllikelycutintotheglobaldominanceofthedollar.Governmentsinterestedinavoidingdollar-basedsanctionsorinbuildingstrongertiestoChinamaywishtoreallocatesomeoftheirreservestorenminbi,supportedbyChina’sef-fortstointernationalizeitscurrency,includingexpansionofitsCross-BorderInterbankPaymentsSystem,provisionofswaplinearrangements,anddevelopmentofthee-yuan.Atanextreme,abipolar(dollar,renminbi)ormultipolar(dol-lar,euro,renminbi)globalcurrencysystemcouldemerge.Eveninthissituation,thedollarwouldlikelyremainthesinglemostimportantglobalcurrency,andthereisalmostnochanceofitsreplacementbytherenminbiinanapoca-lypticscenarioofworlddominancebyChina.However,theUnitedStates,andtheWestmoregenerally,wouldfaceanerosionofitsgeopoliticalreach,whilefragmentationoftheworldeconomicandfinancialsystemintoseparateblocswouldlikelyreduceglobaleconomicgrowth.

However,thesearesignificantifsandwhoknowswhenitmayhappenevenifwehadconfidencethatitwill,eventually.AnditisnotentirelyclearthatjustbecauseformostofourliveswehaveexperiencedtheBritishCommonLaw-basedsystem,sincethe1970sunderthefloatingexchangesystemandbeforethatthefixedex-changeratesystembasedaroundthelinkstogold,thatthiswillalwaysbethecase.

SeveralothercommentatorstothispiecewillhavebeeninthesameconferencesthatIhaveovertheyearswhereacademicscholarsfromAsia,especial-lyChina,espouseafuturemonetarysystemwheretheInternationalMomentaryFund’sspecialdrawingrightswouldtransferfrombeingpurelytheaccountingcurren-cyoftheIMFtobeingthecurrencythatistradedaroundtheworld,reflectiveofallthemajoreconomiesthatdrivetheworldeconomy.

Werethistohappen,itwouldonmanybasicsseemmorejust,astheroleofthedollarand,behindit,thatofFedpolicyinfrequentlydrivingtheerraticcycleofmanyothereconomies’affairs,oftenseemssomewhatunjust.Thissaid,Ihaveneverbeenpersuadedthataworldcentralbankassuchcouldberesponsibleforsuchacurrency,ad-justingitsmonetarypolicyforthenetbenefitoftheinter-estsofthemost,ratherthanwhatwehavenow,wherethecentralbankatleasttriesusuallytodeliverwhatitthinksbestforthecountryitserves.ButifsomedayIndiaandChinadidsharethesekindsofambitions,thenitmightbesomethingweshouldtakemoreseriously.

Indeed,imagineaworldiftheBRICSpoliticalgroupwasfocusedbeyondjustsymbolismandgrandstanding,andbehindit,ChinapositivelyencouragedIndiatobe-comeanear-equalpartnerinsomethinglikeitsOneBeltOneRoadstrategy.ItwouldthenquitelikelyhaveamuchbetterchanceoftransformingmuchofAsiantradeandinvestment,indeedfortheworldasawhole,includingallthosecountriesthataretiedintotradewiththem.Insuchcircumstances,Icouldseethisbeingatriggerforanendtothedominanceofthedollar,justasIcouldifGermanyevergaveintotheFrench-leddesire—sharedbyothers—foratruecommoneuro-denominatedbondacrossthewholeoftheeurozone.Perhapsboththingsarenevergoingtohappen.

Muchofthetalkbehindwhythisquestionisaskedofusis,ofcourse,tiedtotheannualBRICSpoliticalleaders’summit,wheretherehasbeenpersistenttalkofthegroupexpandingsignificantlytoincludemanyothercountries,includingthelikesofSaudiArabia.Ifthisweretohappen,andintheunlikelyeventtheyreallydecidedtofocusontrulysharedpotentialbenefits,thetalkthatsomanyfringejournalistschatteraboutrecently,includingthebeginningoftheendofthedollar,mightnotbesofanciful.Atthesametime,itisobviouslyprettyclearthatunlessallofthosewithinthatgrouptrulysharesomecommonlegal

Imagineaworld

ifChinaencouragedIndiatobecomea

near-equalpartner

insomethinglike

itsOneBeltOne

Roadstrategy.

JIMO’NEILL

FormerCommercialSecretarytotheTreasury,UnitedKingdom,andformerChairman,AssetManagement,GoldmanSachsInternational

I

guessitisratheragoodthingforthedollarthatChinaand Indiararelyagreeonanythingnorcollaborateonany- thingofsubstance,andspendsomuchtimeinsuspicionoftheotherandskirmishingontheirborder.Ifthesetwohugenations,morethanone-thirdoftheworld’spopulationbetweenthem,andbothincreasinglyimportantforthemar-ginalperformanceofglobalGDP,everdidtrulycollaborateandsharedfocusedambition,thenthefutureofthedollarastheworld’sdominantcurrencywouldbedoomed.

Therearesomebasicfactsthatthisquestionofthedol-lar’sfutureignores.Historyhasshownthattheworldmon-etarysystemisultimatelydominatedbythecurrencyofitslargesteconomy.Atsomepoint,ifChinatakesoverasthenumber-oneineconomyintheworld,andespeciallyifoth-erlargeemergingeconomiesalsobecomeamuchbiggershare,itistoughtoseethedollar’sdominancesurviving.

18THEINTERNATIONALECONOMYSPRING2023

principles,alongsideallowingtheirowncurrenciesandinvestmentstobemorefreelytraded,itwouldbetoughtoseeothernon-BRICScountriessuddenlywantingtoparticipate.Andindeed,wouldthesemembercountriesabandontheirseemingnever-endingdesiretoownassetsinthesupposedlydecliningWesternworld?JustlookattheUnitedKingdom,forexample.Despiteourunfortu-nateseemingunendingabilitytoshootoureconomicfor-tunesinthefoot,westillareamagnetforinvestmentsfrommanyofthesenations,whetheritbeourleadingPremierLeaguefootballteams,Londonproperty,orourmorestylishautoproducerbrands.

freelyconvertible.PerhapsChinawillchangethisinthefuture,butuntilitdoes,thereislittleriskthatitwillre-placethedollar.

Italsoisimportanttonotethatthisisnotazero/onestory,whereeveryoneeitherusesthedollarortherenminbi,orsomeothercurrency.Itisentirelypossible,infactquitelikely,thattherenminbiwillbeincreasinglyusedininternationaltransactionsandheldasareservecurrency,givenChina’sroleastheworld’spreeminenttradingnation.

Butthatdoesn’tmeanthatcountriesstopusingdollars,theywilljustusethemlessfrequently.Supposetheshareofworldtradedoneindollarsfallsby10–30percentagepoints.Howwouldwenoticeandwhywouldwecare?

It’spossiblethatthiswillmeansomewhatlessde-mandfordollarsandalowervalueagainstothercurren-cies,butwouldwereallybepanickedbytheideathatthedollarmightbe5–10percentloweragainsttheeuro,theyen,andothercurrencies?Thedollarfluctuatesallthetimebyamountsthislargeandalmostnoonepaysanyattention.And,inallprobability,theeffectwouldnotevenbeenoughtomovethedollarby5–10percent.

Inshort,thisishugetheaterovernothing.TherearethingsthatChinacoulddowithitsalliesthatwouldmatteragreatdealtotheUnitedStates.Forexample,theycouldstophonoringU.S.patentsandcopyrightsonprescriptiondrugs,software,andarangeofotheritems.ThatwouldbearealhittotheU.S.economy.Bycontrast,theconcernaboutthedollarlosingitsstatusisajoke.

Thisishugetheaterovernothing.

DEANBAKER

SeniorEconomist,CenterforEconomicandPolicyResearch

F

ormanydecadesnowwe’veseenominousstories abouthowthedollarwasgoingtoloseitsplaceasthe world’sreservecurrency.Therearetwomainpointsthatviewersofthistheaterneedtokeepinmind.First,ithasnothappenedthusfar,andsecond,itreallywouldn’tmattermuchifitdid.

Onthefirstpoint,we’vebeenhearingabouttheworldmovingawayfromdollarssinceU.S.PresidentRichardNixonendedthetiebetweenthedollarandgoldin1973.TheriseofOPEC,andthefallofthedollaragainstothermajorcurrencieslaterinthedecade,encouragedthisview.Butbytheendofthe1970s,countrieswerestillusingthedollarfortheoverwhelmingmajorityoftheirtransactionsandalsoastheirpredominantreservecurrency.

Thecreationoftheeurointhe1990swassupposedtobeanotherthreattothedollar’spreeminence.Again,wehavenotseenmuchimpact.Obviously,thecountriesintheeurozonetradeineurosratherthandollars,butnotmanyothercountriesdo.Theeuroisusedtosomeextentasareservecurrency,butitlargelydisplacedholdingsofmarksandFrenchfrancs,notdollars.

NowwearesupposedtobelievethatChina’sren-minbiwillreplacethedollarastheworld’sreservecur-rency?Ashasbeenwidelynoted,therenminbiisnot

Themoreprobable

Trump’sreturnto

theU.S.presidencyisregarded,themore

amovementaway

fromtheglobalrole

ofthedollar.

MARINAV.N.WHITMAN

ProfessorofBusinessAdministrationandPublicPolicy

Emerita,UniversityofMichigan,formermemberofthe

President’sCouncilofEconomicAdvisors,andformerChiefEconomistandGroupVicePresident,GeneralMotors

T

heroleofthedollarininvoicingworldtradehasde- clinedbysome10percentagepoints,fromroughly 70percentattheturnofthecenturytoabout60per-centtoday.Itspositioninforeignexchangereserveshas

SPRING2023THEINTERNATIONALECONOMY19

followedasimilarpattern,withroughlythesamedropinitsglobalpercentageovertheperiod.Butwhatistheout-lookforthefuture?Willthedeclineofthedollarcontinue,bereversed,orstayaboutthesame?

Totheextentthatdevelopingcountriescontinuediversifyingtheirholdings,thedollar’spositioninfor-eignexchangereserveswillcontinuetodecline,thoughprobablystillratherslowly,despitethepersistenceofshort-termfluctuationsinthatrole.Butitislikelytore-mainthedefaultcurrencyininternationaltradeandasaglobalunitofaccountor,again,continueaslowde-cline.Nothingthatwouldchangethatroleprecipitous-lyappearscurrentlyonthehorizon,despitetheUnitedStates’rapidlyrisingdebtanditsprolificuseofeco-nomicsanctions,whichitimposesmorefrequentlythananyothercountry.

ThemaindevelopmentthatmightprecipitatesuchachangewouldbecontinuingorincreasinginstabilityintheUnitedStates’politicalout