Paul Lachine

What Can Replace the Dollar?

Already before the recent US debt-ceiling imbroglio, the dollar had begun losing its luster as a global reserve currency. But, with the euro facing serious problems of its own, what can replace the greenback?

BERKELEY – For more than a half-century, the US dollar has been not only America’s currency, but the world’s as well. It has been the dominant unit used in cross-border transactions and the principal asset held as reserves by central banks and governments.

But, already before the recent debt-ceiling imbroglio, the dollar had begun to lose its luster. Its share in the identified foreign-exchange reserves of central banks, for example, had fallen to just over 60%, from 70% a decade ago.

The explanation is simple: the United States no longer dominates the world economy to the extent that it did in the past. It makes sense that the international monetary system should follow the global economy in becoming more multipolar. Just as the US now has to share the world stage with other economies, the dollar will have to make room for other international currencies.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/1SAZ9qK;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.