Renowned economist Nouriel Roubini, also known as “Dr. Doom,” has predicted a shift in the global reserve currency system from unipolar to bipolar. Speaking in an interview with Indian media outlet CNBC TV-18, Roubini, who is the chief economist for Atlas Capital and Professor Emeritus of Economics and International Business at New York University Stern School of Business, expects most countries that attempt to reduce their reliance on the U.S. dollar to propose the Chinese yuan as an alternative. He explained that most countries that form a rival group to oppose the U.S. and reduce their reliance on the dollar are striving to establish an alternative economic, monetary, and global reserve currency system. The economist added: These allies are going to move in the direction of proposing the RMB [renminbi] as an alternative system to the U.S. dollar. We are going to move from a unipolar to a bipolar currency global reserve currency system.
Roubini has previously warned that escalating restrictions imposed by the U.S. government on its adversaries, including financial sanctions, is a catalyst for the rise of a bipolar global reserve currency system in the coming decade. He believes that India, along with a few other emerging markets, will become a dominant power in the coming years and decades, particularly with the implementation of additional reforms. As a result, he considers these markets to be promising investment destinations for both fixed-income and equity markets. However, he does not expect India to participate in the de-dollarization movement despite the potential rise of an alternative currency system. He believes that India’s strategic rivalry with China means it may remain more aligned with the Western currency system rather than the renminbi.
The BRICS nations, which currently consist of Brazil, Russia, India, China, and South Africa, are reportedly working on developing a new form of currency that will reduce their reliance on the U.S. dollar. Several other countries have expressed their interest in joining the bloc, including Argentina, Iran, Indonesia, Turkey, Saudi Arabia, and Egypt. Ten Southeast Asian countries that are members of the Association of Southeast Asian Nations (ASEAN) have also agreed to use local currencies to support cross-border trade and investment in the region.
The shift from a unipolar to a bipolar global reserve currency system, as predicted by Roubini, will have significant implications for the global economy. It could lead to increased volatility and uncertainty in financial markets, as well as potential geopolitical tensions between the U.S. and its allies and rivals. However, it could also provide opportunities for emerging markets to assert their influence and challenge the dominance of the U.S. in the global financial system.
It remains to be seen how the global reserve currency system will evolve in the coming years and decades, but Roubini’s predictions provide valuable insights into the potential scenarios that could unfold. As the world becomes increasingly interconnected and interdependent, it is important for policymakers, investors, and businesses to stay informed and adapt to changing circumstances to remain competitive and successful in the global economy.