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2021-04-01

The Dollar’s Fragile Hegemony

For many reasons, the Chinese authorities will probably someday stop pegging the renminbi to a basket of currencies, and shift to a modern inflation-targeting regime under which they allow the exchange rate to fluctuate much more freely, especially against the dollar. 

Considering how much the United States relies on the dollar’s special status – or what then-French Finance Minister Valéry Giscard d’Estaing famously called America’s “exorbitant privilege” – to fund massive public and private borrowing, the impact of such a shift could be significant. Given that the US has been aggressively using deficit financing to combat the economic ravages of COVID-19, the sustainability of its debt might be called into question.

Kenneth Rogoff Project Syndicate 30 March 2021


https://www.project-syndicate.org/commentary/flexible-renminbi-could-threaten-global-dollar-hegemony-by-kenneth-rogoff-2021-03





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