Experts Say Dollar Dominance Debate Misses the Point, US Needs Economic Focus

Two experts have explained that the global debate on the future of dollar dominance misses the point because it doesn’t focus on how the dollar’s future will evolve. They warned: “If the U.S. doesn’t keep its house in better order, dollar dominance will be the least of our worries.”

Experts Discuss US Dollar’s Dominance

Steven Kamin, a senior fellow at the American Enterprise Institute and former director of the International Finance Division at the Federal Reserve Board, and Mark Sobel, the U.S. Chair of the Official Monetary and Financial Institutions Forum and former deputy assistant secretary for International Monetary and Financial Policy at the U.S. Treasury, discussed the dominance of the U.S. dollar in an opinion piece published by the Financial Times, published on Monday.

They argue that despite longstanding criticisms of the dollar’s dominance, the key focus should be on strengthening the global economy rather than finding an alternative currency. They explained that the dollar remains dominant due to the large, dynamic U.S. economy, deep and liquid financial markets, and strong rule of law, noting that other contenders like the euro and Chinese renminbi have limitations. They asserted:

The global debate on the future of dollar dominance misses the point because it doesn’t focus on how the dollar’s future will evolve.

The authors suggest that the future of dollar dominance depends on U.S. economic policies, emphasizing that a sound financial approach will stabilize the global economy while U.S. fiscal mismanagement could cause severe disruption.

“Instead of the debate focusing on the euro, RMB, CBDCs [central bank digital currencies], stablecoins, payments systems etc as alternatives, the malign scenario highlights the real issue — the U.S. needs to look into the mirror,” they stressed, cautioning:

If the U.S. doesn’t keep its house in better order, dollar dominance will be the least of our worries.

The authors dismiss crypto assets and sanctions as threats to the U.S. dollar. “Some argue that crypto assets may help free the international monetary system from the dollar. Balderdash. Key stablecoins are pegged to the dollar. Watching other crypto assets prices fluctuate gives one a case of vertigo, the antithesis of a store of value,” they opined.

Do you agree with Steven Kamin and Mark Sobel about the U.S. dollar’s dominance and that potential alternatives pose no significant threat? Share your thoughts in the comments section below. #Write2Earn