Previous Liberty Street Economics analysis and New York Fed research addressed the potential implications for the United States if the dollar's global role changed, noting that the currency might not retain its dominance forever. This post checks the status of the dollar, considering whether any erosion in the dollar's international standing has occurred. The evidence to date is that the dollar remains the world's dominant currency by broad margins. Alternatives have not gained extensive traction, albeit this does not rule out potential future pressures.
[...] Major developments pertinent for the current international financial architecture include the introduction of the euro in 2000, China's rising status in the global economy, and post financial crisis changes in the U.S. policy and financial environment. Various additional policy and operational developments have had and will have the potential to alter the desirability of using U.S. dollars.
[...] After its introduction in 2000, the euro saw its status as an international currency deepen, peak around 2003, and decline in the aftermath of the global financial and euro-area crises amid slower growth in the euro area and uneven progress toward reaching a fuller financial and economic union.
[...] The international use of China's currency has risen with the importance of China in global output, official investments to improve China's institutions and governance, and deliberate promotional steps by the Chinese government.
[...] Potentially working against the international use of dollars are: a decline in correspondent banking, where banks seek out other banks to provide services on their behalf (occurring as banks de-risk); higher fiscal imbalances in the United States, to the extent that concerns rise about fiscal deficits and debt burden sustainability; and policy actions that could weaken international trade and financial ties.
[...] Cryptocurrencies, set up to challenge the conventional structure of payments in official currencies
(Score: 0) by Anonymous Coward on Wednesday February 13 2019, @01:35PM (4 children)
Euro, Yuan, Bitcoin?
What about silver or gold?
(Score: 4, Interesting) by isostatic on Wednesday February 13 2019, @04:53PM (1 child)
Gold is a terrible currency.
https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ [theatlantic.com] etc
(Score: 2) by Thexalon on Wednesday February 13 2019, @06:08PM
It's a terrible currency unless you're the person who controls the gold mines.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 4, Interesting) by richtopia on Wednesday February 13 2019, @05:14PM
EUR: was a serious contender until the European debt crisis (Greece)
GBP: Brexit
CNY: China's controls over the currency is not conducive to a reserve currency. This could change in the future. https://en.wikipedia.org/wiki/Renminbi#International_reserve_currency [wikipedia.org]
JPY: Deflation worries
CAD: Heavy dependence on oil
These quick comments do not fully capture the situation. However, USD will remain popular for years thanks to it being so engrained into international trade already.
https://en.wikipedia.org/wiki/Reserve_currency [wikipedia.org]
(Score: 0) by Anonymous Coward on Wednesday February 13 2019, @07:03PM
https://img.huffingtonpost.com/asset/5660750c210000c9005ac2cf.jpeg?ops=crop_0_28_630_386,scalefit_720_noupscale [huffingtonpost.com]