Renowned economist Nouriel Roubini, also known as “Dr. Doom,” has predicted a shift from the unipolar global reserve currency system to a bipolar one. He expects the majority of countries that strive to reduce their reliance on the US dollar to propose the Chinese yuan as an alternative. In an interview with CNBC TV-18, Roubini, who is the chief economist for Atlas Capital and also Professor Emeritus of Economics and International Business at New York University Stern School of Business, explained that most countries that oppose the US and form a rival group are working to establish an alternative economic, monetary, and global reserve currency system. He believes that these allies will move in the direction of proposing the renminbi as an alternative system to the US dollar, leading to a bipolar currency global reserve currency system.
Roubini has warned previously that the escalation of restrictions imposed by the US government on its adversaries, which includes financial sanctions, is a catalyst for the rise of a bipolar global reserve currency system over the next decade. Moreover, reports suggest that the BRICS nations, including Brazil, Russia, India, China, and South Africa, are working on creating a new currency that reduces their reliance on the US dollar. Several other countries, such as Argentina, Iran, Indonesia, Turkey, Saudi Arabia, and Egypt, have shown their interest in joining the bloc, which might further contribute to the decline of the US dollar as the world’s reserve currency.
India and De-Dollarization
Roubini also shared his thoughts on India in particular, acknowledging that the country’s fiscal policy “could be better,” but recognising it as a promising emerging market. He expects India, along with a handful of emerging markets, to become a dominant power in the coming years and decades with the implementation of additional reforms, making them promising destinations for investors.
Although he does not expect India to participate in the de-dollarization movement, he believes that India, along with other emerging markets, will take over the globe as a dominant power in the coming years and decades, particularly with the implementation of reforms. Roubini pointed to India’s strategic rivalry with China, indicating that it might remain more aligned with the Western currency system than the renminbi.
Ten Southeast Asian countries that are members of the Association of Southeast Asian Nations (ASEAN) have also agreed to support cross-border trade and investment in the region by reducing their reliance on the US dollar and instead using local currencies.
The future of the global reserve currency system remains uncertain, but the emergence of alternative currencies and the increasing rivalry between nations might lead to the shift from the unipolar to a bipolar system, where the US dollar no longer holds its dominant position. It may take years or even decades for this shift to happen, but it is clear that the current global economic landscape is undergoing a significant transformation.