The faultlines
As the crisis started, the US Federal Reserve assumed a leadership role in international finance, as it did during the 2008 global financial crisis. On the other hand, the US administration has rejected the idea that international cooperation is needed to combat the impact of COVID-19 on public health and economic activity. While in the past, it has weaponized the dollar’s central role in international settlements. As a result, argues Benjamin Cohen, the pandemic has reaffirmed the greenback’s critical role as the ultimate safe haven but at the same time it will also “open the wound even wider.”
The Pandemic Is Shaking the Dollar’s Supremacy
By: Benjamin J. Cohen – University of California, Santa Barbara
The trends before the COVID crisis
It is argued that the COVID crisis is precipitating the trends that were in place before the pandemic. The International Economy magazine asked, at the beginning of 2020, a number of economists and other distinguished thinkers to what extent will the global role of the U.S. dollar will be different in a decade from now.
The dollar-based system remains effective but has lost much of its legitimacy.
William H. Overholt, Harvard University
For alternatives to the dollar, look toward Brussels and Berlin, not to Beijing and Shanghai.
Barry Eichengreen, Berkeley.
Sales of dollar assets by non-U.S. financial institutions could lead to fire-sale prices. Sales of domestic assets to raise dollars would further strengthen the dollar. Either could significantly worsen a crisis.
William R. White, BIS
The U.S. dollar will not be displaced as the dominant international currency without further drastic and provocative moves by the U.S. government.
Richard N. Cooper, Harvard University
The most serious challenge for the dollar comes from the U.S. government itself.
Lorenzo Codogno, LSE
Financial sanctions are effective. But the cost to the United States will be high as alternative payments mechanisms increase in importance.
Anne O. Krueger, Johns Hopkins University
Is the World’s Reserve Currency In Trouble?
By: The International Economy
