Panel
Beyond the Dollar
Milken InstitutePeter Passell, Youssef Boutros-Ghali, Barry Eichengreen, Joaquim Levy, James McCormack, Nouriel Roubini, Ethan Penner, Rockwell, Gabriel
- Analysts anticipate a long-term decline in the US dollar's global dominance as the US share of global output shrinks and geopolitical challenges mount.
- Youssef Boutros-Ghali forecasts that the dollar has no foreseeable circumstances for decline, whereas he asserts the euro faces structural flaws that could eventually lead to its collapse.
- Barry Eichengreen predicts the dollar will lose its monopoly as the leading international currency once a viable alternative exists, arguing that the scope for such alternatives is currently underestimated.
- James McCormick identifies tail risks involving the erosion of US institutional integrity, including potential political control of the Federal Reserve, fiscal dominance, and an audit of the Fed that could undermine the dollar's status as a safe asset.
- Concerns are raised that the Trump administration's fiscal policies, specifically tax cuts costing trillions and potential deficit monetization, could lead to fiscal unsustainability, inflation, and eventual debt renegotiation or default.
- A policy contradiction is highlighted where US economic actions intended to stimulate the economy may force a stronger dollar due to inflation, conflicting with the administration's preference for a weaker currency to support manufacturing and low interest rates.
- Strategic rivals such as China, Russia, and Iran are expected to view large holdings of US dollar reserves as risky due to potential sanctions and asset freezing, accelerating a search for alternatives.
- China is described as pursuing a multi-decade strategy to make the Renminbi a global reserve currency, utilizing it as a unit of account and means of payment in trade with Russia, BRICS nations, African countries, and the Emirates, despite current political and transparency barriers.
- The euro is considered a potential alternative that could be resurrected, currently holding 20–25% of international reserves, though it faces risks regarding periphery currency exit, redenomination, and widening spreads unless it develops supranational government bonds and deeper integration.
- A shift toward a world of multiple reserve currencies is anticipated as the US retreats from globalization and cannot provide sufficient liquidity for 21st-century needs, a transition expected to be gradual over 20 to 50 years.
- US debt is projected to continue rising through the medium term and for the foreseeable future over the next half-century, with the debt-to-GDP ratio approaching limits that may necessitate military leverage to avoid repayment.
- While a multiple reserve currency system may increase exchange rate volatility, it is expected to offer the benefit of government discipline and allow central banks to diversify portfolios beyond single-currency reliance.
- Specific timeframes mentioned include the next 12 months for potential Federal Reserve board appointments, a decade-long view for China's currency ambitions, and multi-decade horizons for the US shrinking economy and potential dollar demise.