The topic of de-dollarization has been in the news a lot recently, with many speculating that the US dollar could collapse in the near future. The BRICS nations (Brazil, Russia, India, China, and South Africa) have been at the forefront of this discussion, and there have been several decisions made with the help of members of the Organization of the Petroleum Exporting Countries (OPEC) to ditch the dollar in gas and oil settlements. Worldwide Google Trends data shows that the term “de-dollarization” reached the highest score of 100 in terms of search interest during the week of April 2 to April 8, 2023. Although interest has risen, the internet has been flooded with stories discussing the U.S. dollar’s theoretical doom and its removal from the throne of the world’s dominant reserve currency.
However, Ian Bremmer, the founder of Eurasia Group and an author known for his knowledge of global political risk, has offered a different perspective on the alleged collapse of dollar dominance. Bremmer acknowledges the trend of de-dollarization headlines by highlighting eight different articles. The author says that these stories have “provided a fertile ground for gold bugs, crypto shills, hyperinflation truthers, techno-libertarians, anti-imperialists, and run-of-the-mill grifters to stoke fear about the dollar’s imminent death and its supposed catastrophic consequences for the United States and the global economy.” Bremmer shows USD usage data from the Federal Reserve and insists that “rumors of the dollar’s death are greatly exaggerated.” He also asserts that, by most measures, the greenback “remains incontrovertibly dominant in global trade and finance.” The Eurasia Group founder stresses that the U.S. dollar possesses several “desirable features,” such as offering stability while also being “liquid, safe, and convertible.”
Economist Paul Krugman also published an op-ed about the de-dollarization subject in The New York Times. Krugman takes aim at gold bug Peter Schiff and “Rich Dad, Poor Dad” author Robert Kiyosaki. The op-ed says that some of these individuals are “Weimarists,” insisting that they have been predicting Weimar Republic-like inflation in the United States. Krugman insists that the U.S. dollar’s dominance is not really at risk, and the “dollar’s role looks pretty secure.” “The dollar has three big advantages,” the Nobel laureate said. “One is incumbency: Since everyone is already using dollars, it would take exceptional circumstances to get them to switch. A second is that U.S. financial markets are open: Unlike China, we don’t impose controls on people trying to move money into or out of the country. The third is the rule of law,” Krugman added. Concluding his “subscriber-only newsletter,” Krugman says there’s “one major caveat.” He believes there’s a possibility that the U.S. could default on debt because the Republican-controlled House refuses to raise the debt ceiling.
In terms of the political spectrum, Krugman is a left-leaning Democrat and is rated “most liberal” by allsides.com. “Who will trust the currency of a nation that appears to have politically lost its mind?” Krugman asks in his NYT op-ed. “If that happens, the threat to the dollar’s reserve-currency status will be the least of our problems.”
It is clear that the future of the US dollar as the world’s dominant reserve currency is still up for debate. While some experts believe that the dollar’s position is secure, others are concerned that the trend of de-dollarization could have a significant impact on the global economy. Only time will tell what will happen, but it is important to keep an eye on this issue as it develops.