The Dollar’s Exorbitant Privilege
The US dollar's preeminence in the world economy is being questioned due to President Donald Trump's actions in international relations.
The administration's policies, including trade barriers and financial interventions, may undermine the dollar's dominance, and the lack of plausible alternative currencies may not be enough to defend it.
The world economy has organized itself around the dollar for decades and, contrary to numerous failed predictions, this isn’t about to change.
Trump’s all-fronts assault on business as usual in international relations has cast things in a different light. Sometimes, the unthinkable happens.
Two books published this year delve into the history of the dominant dollar: Our Dollar, Your Problem by Kenneth Rogoff of Harvard University,
https://yalebooks.yale.edu/book/9780300275315/our-dollar-your-problem/
and King Dollar by Paul Blustein,
https://yalebooks.yale.edu/book/9780300270969/king-dollar/
a journalist who’s spent many years covering global finance. Both books were close to completed before Trump was re-elected.
A big threat to the dollar’s standing is the perception that US dollar assets are no longer safe.
Rogoff, The US has become addicted to over-borrowing, he argues, guided in part by the view, following the global financial crisis of 2008-2009, that ultra-low interest rates are the new normal.
Rather than moving to a euro standard or a renminbi standard, still hard to imagine, the world might shift by degrees to no standard and/or rival standards.
For the moment, investors are unperturbed. The thought might be, “This too shall pass.” Trump is an outlier in due course, politics will move on and normality will resume. Maybe so.
If it doesn’t, the end of King Dollar might not be our biggest problem.
Clive Crook Bloomberg December 29, 2025
Kommentarer