De-dollarization has been a trending topic in 2023, with discussions surrounding the possible collapse of the U.S. dollar as the world’s dominant reserve currency. The BRICS nations (Brazil, Russia, India, China, and South Africa) have made alliances that have raised concerns about the future of the dollar, with many reports suggesting that other currencies are gaining popularity. However, Ian Bremmer, the founder of Eurasia Group, and economist Paul Krugman believe that such speculations are overblown.
Bremmer acknowledges the trend of de-dollarization headlines by highlighting eight different articles. He points out that these stories have allowed gold bugs, crypto shills, hyperinflation truthers, techno-libertarians, anti-imperialists, and grifters to create panic about the impending collapse of the dollar and its supposed catastrophic consequences for the United States and the global economy. However, he shows USD usage data from the Federal Reserve and insists that the greenback “remains incontrovertibly dominant in global trade and finance.”
In addition, Krugman also published an op-ed about the de-dollarization subject. He asserts that the U.S. dollar’s dominance is not at risk, and the “dollar’s role looks pretty secure.” Krugman says there are three significant advantages the dollar has: incumbency, open U.S. financial markets, and the rule of law. Concluding his “subscriber-only newsletter,” Krugman says there is 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.
Moreover, 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. Google Trends data indicates that the subject began gaining momentum during the last week of March 2023. Prior to that, interest rose during the end of January 2023, but not nearly as high as the week of April 2-8 recorded by Google Trends’ 12-month metrics.
Despite the rising interest in de-dollarization, the US dollar remains the global reserve currency. Many countries and companies still use it for international trade, and it is the most widely held currency in the world. The dollar’s strength depends on its ability to maintain its stability, liquidity, and convertibility. Other currencies could rise in popularity, but there is currently no viable alternative to the US dollar as a reserve currency.
The United States’ global economic dominance, along with its stable financial institutions, ensures that the dollar retains its position as a reserve currency. Due to the global economy’s interconnected nature, the collapse of the dollar would have significant ramifications, leading to the collapse of the global financial system. Therefore, many governments and institutions are unlikely to push for de-dollarization. However, countries such as China and Russia are trying to increase their influence on the global stage, and moving away from the dollar could help them achieve that goal.
In conclusion, while the talk of de-dollarization is growing, the US dollar still remains the world’s dominant reserve currency. The US economy’s strength, stable financial institutions, and the global interconnectivity ensure that the dollar’s position as a reserve currency remains strong. Although other currencies may rise in popularity over time, there is currently no viable alternative to the US dollar.
