A thank you to a blog reader for pointing me to this article recently appearing in The Financial Times. In this article, Rana Foroohar asks if we might see a future where the role of the US dollar as global reserve currency is diminished. It's a good question and right in line with what we cover here. Below is a brief excerpt from the article. Readers should follow the link to read the full article on The Financial Times.
-------------------------------------------------------------------------------------------------------------------------We may be heading towards a post-dollar world
"The world is more likely to become tripolar — or at least bipolar — with more regionalisation in trade, migration and even capital flows in the future. There are all sorts of reasons for this, some disturbing (rising nationalism) and others benign (a desire for more resilient and inclusive local economies).
That begs the question that has been seen as controversial -- are we entering a post-dollar world?" . . . . . . . . . Click here to read the full FT article
My added comments: In his most recent update on Fed policy Fed Chairman Powell made it clear that the Federal Reserve will do whatever is necessary to support a return to full employment in the US as soon as possible. Rates will be kept down for at least 2 and 1/2 more years and whatever money creation and asset purchases are required will be undertaken. As I understand this policy statement, it means the Fed is willing to let the US dollar slide as a result of this policy if that is what has to happen. Chairman Powell did not state this directly, but it was clear that such a slide in the US dollar would not cause the Fed to change policy course to try and support the economy. It is reasonable to assume that the dollar is likely to fall in reaction to this policy.
Added notes: Stephen Roach writes that the role of the US dollar as global reserve currency will diminish in the years to come and writes a followup to that article in response to those who argue there is no reasonable alternative to the US Dollar. Links to both articles are just below:
A Crash in the Dollar is Coming
Dollar Crash: How Will it Unfold?
More here on CNBC - Dollar Crash is Almost Inevitable
6-19-2020: Alasdair Macleod presents a potential worst case scenario where the US dollar collapses within the next year
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