VOX has an interview of Viv Davies, author of The Dollar Trap: How the US dollar tightened its grip on global finance, by Eswar Prasad. Davies’ book, notes VOX, explains how “in light of the financial crisis, the dollar continues to play a central role in the world economy and why it will remain the cornertsone of global finance for the forseeable future.”
It seems that the conventional wisdom is that the dollar is safe for now, though in the long-term China’s yuan will eventually take a bigger share of reserves. Indeed, a recent Reuter’s piece noted that, “Peter Zoellner,” a senior BIS official, “told one of the year’s biggest gatherings of foreign exchange dealers that the role of China’s renminbi would continue to grow.” However, Zoellner was quick to also point out that the relative dominance of the United States dollar as the world’s reserve currency “will change for the next 10, 20 years.”
It looks like the predictors of the dollar’s demise as the world’s reserve currency were wrong, at least for now, but you have to wonder about the fragility of the dollar’s position. Nassim Nicholas Taleb, in his book Antifragile, argues that the best way to predict the future is not to add things but to take things away, especially those things that are the most “fragile” in the present. The dollar may be seen as stable for the next few decades, due to lack of a clear alternative, but, as the Bitcoin case has shown, an alternative reserve currency is something that technology may enable sooner than most people think.
The Davies interview: