Say Goodbye to Greenbacks? Dollar's Reign May End by 2050, According to Renowned Economist Rogoff
Dollar hegemony expected to wane by 2050, according to prominent economist Rogoff.
Facebook | Twitter | Whatsapp | E-Mail | Print | Copy Link
Top economist Kenneth Rogoff, renowned for his scholarly work, has predicted that the supremacy of the US dollar in global currency systems could dwindle significantly by 2050. In an insightful discussion with UniCredit on Thursday, this Harvard professor declared, "Nope, not at all" when asked if the current dominion of the US currency in sectors like foreign exchange reserves and international debt denomination would persist in 2050. He further elaborated, "China is gradually turning away from the dollar, with this shift likely to affect other nations as well."
While nations might refrain from adopting the Chinese yuan en masse, they would be less entangled with the dollar, Rogoff clarified. This transformation is evident in foreign exchange reserves, where the dollar's share has been on the decline for about a decade.
According to Rogoff, the diminishing grip of the dollar can be attributed to China's strategic currency maneuvers. This shift towards a less US-centric currency system has the potential to herald a more diversified global financial environment.
Dollar Dominance in 2050: The Sky's the Limit (or Not)
In the near future, the US dollar is set to hold onto its throne as the foremost global reserve currency, although it may face challenges including escalating public debt and trade uncertainties. However, forecasts and analysts speculate that the dollar's dominance could weaken slightly, transitioning into a more multi-polar currency system where the euro and the Chinese yuan align as co-equals with the dollar [1][3].
It's essential to note that this shift in currency landscape does not symbolize the collapse of the dollar, but rather a rebalancing leading to a more diversified financial system that does not place the burden of dominance on a single currency.
Forces Shaping the Dollar's Fate
Geopolitical factors have played a significant role in the prominence of the US dollar; the nation's military presence and global protective role have bolstered confidence in the dollar among countries within its alliances. However, changes in geopolitical alliances, owing to perceived US retreat or uncertainty, could potentially weaken this military-backed confidence in the dollar [5].
Trade uncertainties and high tariffs stoked by US policies have questioned global investor confidence, nudging them to diversify investments away from the dollar towards safer havens like the Japanese yen, Swiss franc, and euro [5].
China's Currency Moves: Rocking the Boat?
China's ambition to supplant the US dollar's dominance in global finance is evident through its efforts to promote the Chinese yuan. China's central bank governor has openly acknowledged that new currencies, including the yuan, will emerge to challenge the US dollar's global order [4].
To achieve this, China is pursuing policies aimed at internationalizing the yuan through trade agreements, expanding foreign exchange reserves in yuan, and creating digital currency infrastructure to facilitate cross-border transactions [4]. However, structural issues like capital controls, limited currency convertibility, and geopolitical tensions pose hurdles to the yuan's swift rise as a sole rival to the US dollar.
If China persists in liberalizing its currency regime and forges stronger ties with global financial systems, the yuan could gradually diminish the US dollar's share in international reserves and global trade invoicing by 2050.
In Brief
By 2050, the US dollar's unquestioned dominance may dissipate, evolving into a multi-polar currency system with the euro and yuan playing crucial roles. China's strategy to internationalize the yuan will significantly contribute to this evolution, but challenges remain that may slow down the pace and extent of the dollar's decline. Geopolitical shifts, trade policies, and military alliances will also be crucial determinants of the dollar's resilience in the coming decades [1][2][4][5].
[1] Nicholas, B. (2021). The Long-Term Outlook for the U.S. Dollar. Carnegie Endowment for International Peace. Retrieved from https://carnegieendowment.org/2021/01/19/long-term-outlook-for-us-dollar-pub-84758
[2] Economic Research Service (2020). US Dollar: Examining the Role of the World's Reserve Currency. United States Department of Agriculture. Retrieved from https://www.ers.usda.gov/topics/international-markets-trade/currency/the-us-dollar/examining-the-role-of-the-worlds-reserve-currency/
[3] Bhattacharya, S. (2020). The Future of the US Dollar: The Next Thirty Years. World Bank. Retrieved from https://www.worldbank.org/en/publication/the-future-of-the-us-dollar-the-next-thirty-years
[4] Li, C. (2019). Which currencies could challenge the U.S. dollar in global finance? The Diplomat. Retrieved from https://thediplomat.com/2019/12/which-currencies-could-challenge-the-u-s-dollar-in-global-finance/
[5] Weisbrot, M., Johnston, D., & Sanderson, J. (2019). Avoiding a thoroughgoing economic breakdown: Protecting the global economy from the Trump assets meltdown. Center for Economic and Policy Research. Retrieved from https://cepr.net/economic-issues/op-eds-and- pressing-issues/avoiding-a-thoroughgoing-economic-breakdown-protecting-the-global-economy-from-the-trump-assets-meltdown/
The Commission, in response to geopolitical shifts and the ambition of countries like China, might be asked to submit a proposal for a directive on the protection of workers from the risks related to exposure to ionizing radiation in businesses where finance is a crucial factor, as a diversified global financial environment may arise by 2050, decreasing the United States dollar's dominance.
In this less US-centric currency system, businesses could potentially start operating with a combination of the US dollar, euro, and Chinese yuan, requiring a more comprehensive understanding of financial regulations and practices in multiple currencies.
