Discussion between Martin Wolf and Kenneth Rogoff: Speeding Up the U.S. Dollar's Downfall due to Trump's Policies
In this lively conversation on The Economics Show, renowned economist Kenneth Rogoff discusses the future of the US dollar with Martin Wolf, FT's Chief Economics Commentator. Rogoff shares his perspective on the decline of the dollar, with Trump serving as an accelerant in this process.
Rogoff points out that before Trump, the dollar was in a gentle decline for decades; however, the current administration's protectionist policies have sped up the transformation. He explains that as the euro and the Chinese yuan come closer to the dollar, this shift will happen a lot sooner due to Trump's influence.
Addressing the concerns about the US dollar's role as a global currency, Rogoff argues that its exorbitant privilege, which provides the US tremendous leverage over other countries, is lessening. This is especially true as other countries grow more hesitant about the safety of their dollar reserves, such as China, India, Brazil, and Korea.
Discussing the reasons behind this erosion of the US position, Rogoff highlights the abuse of power by the US financial sector, culminating in aggressive tactics like seizing hundreds of billions of dollars from Russia's central bank assets without officially acknowledging it as a default.
Rogoff mentions several measures that indicate the dollar is past its peak, including the decrease in the number of transactions denominated in dollars, the shrinking percentage of when countries borrow abroad in dollars, and changes in the strategies foreign central banks adopt to manage their exchange rates.
The conversation touches upon the link between Trump's protectionist policies and the reduced attraction of pegging a currency to the dollar, as well as the Mar-a-Lago Accord proposal and its potential consequences. Rogoff believes that the dollar's dominance will continue to decrease, and this shift will have far-reaching effects on the global financial system.
Finally, Rogoff discusses the potential turbulence that may arise in the transition from the current state of the dollar to a new era, emphasizing that this transition could be marked by a burst of inflation, financial repression, and significant shocks to the global economy.
- Central banks, particularly those in China, India, Brazil, and Korea, are growing wary about the safety of their dollar reserves, raising concerns about the US dollar's role as a global currency, as discussed by Kenneth Rogoff on The Economics Show.
- As emphasized by Rogoff, the decline of the US dollar, which had been in a gentle descent for decades, has been accelerated by the current administration's protectionist policies.
- Cryptocurrency markets and general-news outlets may witness significant shifts as Rogoff predicts the continued decrease in the dollar's dominance, a transition he believes could lead to a surge in inflation, financial repression, and shocks to the global economy.
- According to Rogoff, one of the measures indicating the dollar's peak is the shrinking percentage of countries borrowing abroad in dollars, a trend that could have profound implications for finance and business worldwide.
- The future of the US dollar in global finance is a topic of heated debate, with renowned economist Kenneth Rogoff arguing in his conversation with Martin Wolf on The Economics Show that the euro and Chinese yuan are closing the gap, thanks in part to Trump's influence on protectionist policies.
