Amid the ongoing de-dollarization efforts embraced by the BRICS alliance, experts have begun to state that the US dollar’s days as a global reserve asset may be numbered. Although the currency is at a new record high, economists have noted things do not look as promising in the long term.
Analysts and experts have gathered at the World Economic Forum in Davos, Switzerland. It was there that US President Donald Trump, inaugurated Monday, noted the United States would be the “world capital” of both AI and crypto. Those efforts may come to fruition, but the nation is clearly losing ground regarding its greenback as the world’s currency.
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The geopolitical tensions over the US dollar have reached a fever pitch in recent years. The BRICS alliance has continued to seek ways to promote local currencies in trade. That has only drawn the ire of US President Donald Trump. In retaliation, he has threatened the presence of 100% tariffs and even discussed the creation of an external revenue service.
Yet, those tensions are separate from how experts perceive the global reserve currency. Although it has been the world’s currency since post-World War II, nothing stays the same forever. Now, amid BRICS and other regions’ actions against it, economists warn that the US dollar’s days as a global reserve currency are numbered.
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In a recent session at the World Economic Forum called ‘State of Play: US Dollar,’ a panel of experts discussed the greenback. Although they note it will remain the global reserve in the coming years, that will undoubtedly change. Specifically, due to the “exorbitant privilege” that it holds, according to Harvard economist Kenneth Rogoff.
“Both parties in the United States seem to think that debt is a free lunch,” he said. Additionally, he noted that interest payments on federal debt have officially surpassed the entire US defense budget. Yet, the currency still stands at a record high, reaching levels not seen since the mid-1980s or early 2000s.
The panel notes that it is bound to fall; the question is, how hard? Economic analysts from the World Forum note that “extreme fragmentation of the financial system could decrease global GDP by roughly 5%—more than the setbacks caused by the 2008 financial crisis.” They ultimately believe a multipolar system will replace US dominance. Yet, the hope is that the change can come gradually and not suddenly.
