{"id":9095,"date":"2023-05-21T11:49:35","date_gmt":"2023-05-21T15:49:35","guid":{"rendered":"https:\/\/granitestatetaxpayers.org\/gst\/?p=9095"},"modified":"2023-05-21T11:49:35","modified_gmt":"2023-05-21T15:49:35","slug":"the-us-dollars-imminent-death-is-greatly-exaggerated","status":"publish","type":"post","link":"https:\/\/granitestatetaxpayers.org\/gst\/the-us-dollars-imminent-death-is-greatly-exaggerated\/","title":{"rendered":"The US Dollar\u2019s Imminent Death Is Greatly Exaggerated"},"content":{"rendered":"<p><strong>The Dollar&#8217;s status as the world&#8217;s reserve currency is critical for the US economy.<\/strong><br \/>\nWith the US debt and budget deficits, borrowing is required to finance government spending.<\/p>\n<p><strong>The following analysis by <a href=\"https:\/\/www.aei.org\/\" rel=\"noopener\" target=\"_blank\">American Enterprise Institute<\/a> sheds light on the reserve currency issue.<\/strong><br \/>\nIn the event of a global recession later this year, the dollar will receive a strong bid as investors flee to safety: There is little risk we will see the dollar\u2019s sudden demise.<\/p>\n<p><a href=\"https:\/\/granitestatetaxpayers.org\/gst\/wp-content\/uploads\/2023\/05\/US-Dollar.jpg\" target=\"_blank\" rel=\"noopener noreferrer\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/granitestatetaxpayers.org\/gst\/wp-content\/uploads\/2023\/05\/US-Dollar.jpg\" alt=\"\" width=\"225\" height=\"123\" class=\"aligncenter size-medium wp-image-7608\" \/><\/a><\/p>\n<p>By Desmond Lachman, Senior Fellow, American Enterprise Institute.<\/p>\n<p>April 23, 2023<\/p>\n<p><strong>Some alarmist warnings never seem to go away no matter how often they prove mistaken.<\/strong><\/p>\n<p>One is that the <a href=\"https:\/\/nypost.com\/2023\/03\/11\/why-the-us-dollar-has-become-an-at-risk-currency\/\" rel=\"noopener\" target=\"_blank\">US dollar is bound to lose its position soon as the world\u2019s dominant international reserve currency<\/a>, with all the benefits such status affords the US economy.<\/p>\n<p>Judging by a chorus of dollar pessimists including Yale\u2019s Stephen Roach and former Morgan Stanley economist Stephen Jen, it seems the idea the dollar will be dethroned is back in vogue.<\/p>\n<p>Even Brazil\u2019s President Luiz In\u00e1cio Lula da Silva says, \u201cEvery night I ask myself: Why should every country have to be tied to the US dollar for trade?\u2019\u2019<\/p>\n<p><strong>Despite many such warnings over the past two decades, the US dollar remains by far the top dog amongst the world\u2019s currencies.<\/strong><\/p>\n<p>While the dollar has lost some share in the past decade, the International Monetary Fund says the world\u2019s central banks still hold close to 60% of their international reserves in dollars.<\/p>\n<p>Meanwhile, per the Bank for International Settlements, almost 90% of international trade continues to be transacted in dollars.<\/p>\n<p>Several factors are prompting the latest round of dollar doom-mongering. Among these are the recent fears about US regional banks\u2019 health in the <a href=\"https:\/\/nypost.com\/2023\/04\/16\/bidens-approach-to-crisis-make-too-big-to-fail-banks-even-bigger\/\" rel=\"noopener\" target=\"_blank\">wake of the Silicon Valley Bank and Signature Bank failures<\/a>.<\/p>\n<p>Also causing dollar angst is the looming debt-ceiling showdown that\u2019s raising the specter of a US debt default, the growing worry of some central banks that America is weaponizing the dollar as underlined by its Iranian and Russian sanctions and the Federal Reserve\u2019s recent policy mismanagement that <a href=\"https:\/\/nypost.com\/2023\/04\/19\/americans-have-taken-pay-cuts-each-month-since-biden-took-office\/\" rel=\"noopener\" target=\"_blank\">spawned the highest US inflation in 40 years<\/a>.<\/p>\n<p>Before working ourselves into a lather about the dollar\u2019s imminent eclipse, it is well to recall Paul Volcker\u2019s observations on previous occasions the dollar\u2019s continued dominance was questioned.<\/p>\n<p><strong>Volcker noted that for the dollar to be replaced as the world\u2019s leading currency, it had to be replaced by another currency.<\/strong><\/p>\n<p>With all the dollar\u2019s apparent weaknesses, were the euro, the Chinese renminbi and the Japanese yen really more stable currencies?<\/p>\n<p>Volcker\u2019s skepticism about the world\u2019s other major currencies\u2019 ability to knock the US dollar from its lofty perch are as pertinent today as they were at the century\u2019s start.<\/p>\n<p><strong>Take the euro, the world\u2019s second-most-important currency.<\/strong><\/p>\n<p>Never before has the eurozone\u2019s economic periphery, including most notably Italy, been as indebted as it is today. Never since the eurozone\u2019s 1999 launch has its inflation been as high as it is today. <\/p>\n<p>This has to raise the prospect of another round of <a href=\"https:\/\/nypost.com\/2023\/03\/26\/why-the-us-banking-crisis-is-like-winter-in-europe\/\" rel=\"noopener\" target=\"_blank\">eurozone sovereign-debt crisis<\/a> as the European Central Bank has been forced to slam on the monetary brakes and switch from a policy of massive bond buying to one of balance-sheet reduction.<\/p>\n<p>Any such crisis would summon serious questions about the euro\u2019s long-term viability, especially given that a new round of eurozone sovereign-debt crisis would be centered on Italy, whose economy is some 10 times the size of Greece\u2019s.<\/p>\n<p><strong>China\u2019s long-term prospects of replacing the dollar as the world\u2019s top currency seem even dimmer.<\/strong> <\/p>\n<p>Over the past decade, <a href=\"https:\/\/nypost.com\/2023\/04\/01\/china-is-buying-the-world\/\" rel=\"noopener\" target=\"_blank\">China experienced a property and credit market bubble<\/a> that exceeded the ones that preceded Japan\u2019s lost economic decade in the 1990s and the US housing and credit-market bubble that preceded the 2008-2009 Great Recession.<\/p>\n<p>This has given rise to a year of declining housing prices and a wave of defaults by Chinese property developers, including most notably Evergrande.<\/p>\n<p>Compounding China\u2019s economic woes was President Xi Jinping\u2019s economically disastrous zero-COVID policy that last year caused the second-slowest growth in half a century.<\/p>\n<p>Any chance the Chinese currency will become fully convertible any time soon is highly remote now that we have the clearest of signs its bubble has started to deflate and its economy is on a low-growth trajectory.<\/p>\n<p>All this is not to say the US dollar\u2019s position as the world\u2019s dominant currency is impregnable and US policymakers do not need to pursue sounder economic policies than they have been to ensure the dollar\u2019s long-run enviable status.<\/p>\n<p>After all, until World War II, the pound sterling was the world\u2019s dominant currency \u2014 only to be eclipsed by the US dollar.<br \/>\n<strong><br \/>\nBut it is to say that with the world\u2019s other major currencies in such a sorry state, there is little risk we will see the dollar\u2019s sudden demise.<\/strong><\/p>\n<p>There is also every prospect that in the event of a global recession later this year, the dollar will receive a strong bid as investors flee to safety.<\/p>\n<p><a href=\"https:\/\/www.aei.org\/profile\/desmond-lachman\/\" rel=\"noopener\" target=\"_blank\">Desmond Lachman<\/a> is a Senior Fellow at the <a href=\"https:\/\/www.aei.org\/\" rel=\"noopener\" target=\"_blank\">American Enterprise Institute<\/a>.<br \/>\n<a href=\"https:\/\/www.aei.org\/op-eds\/the-us-dollars-imminent-death-is-greatly-exaggerated\/\" rel=\"noopener\" target=\"_blank\">Click here to read this artical at the American Enterprise Institute website.\/<\/a><\/p>\n<p>Posted by GST Chairman Ray Chadwick<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Dollar&#8217;s status as the world&#8217;s reserve currency is critical for the US economy. With the US debt and budget deficits, borrowing is required to finance government spending. The following analysis by American Enterprise Institute sheds light on the reserve currency issue. In the event of a global recession later this year, the dollar will [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2584,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[1,7],"tags":[71,73],"class_list":["post-9095","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion","category-secial-alerts","tag-ecomomic-facts","tag-energy-costs"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The US Dollar\u2019s Imminent Death Is Greatly Exaggerated - Granite State Taxpayers<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/granitestatetaxpayers.org\/gst\/the-us-dollars-imminent-death-is-greatly-exaggerated\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The US Dollar\u2019s Imminent Death Is Greatly Exaggerated - Granite State Taxpayers\" \/>\n<meta property=\"og:description\" content=\"The Dollar&#8217;s status as the world&#8217;s reserve currency is critical for the US economy. 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With the US debt and budget deficits, borrowing is required to finance government spending. The following analysis by American Enterprise Institute sheds light on the reserve currency issue. 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