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Trade and geopolitics

Can the US dollar survive as the world’s reserve currency?

Published 31 October 2023

Great power competition has often led to changes in financial systems. As geopolitical tensions between China and the US increase, momentum has gathered behind efforts, particularly by Beijing and some trading partners, to slowly chip away at dollar dominance. Many have begun to question: Would the dollar standard come to an end?

As the United States’ economy has shrunk as a proportion of the global economy, the chorus of voices predicting the US dollar’s demise as the dominant global reserve currency has grown louder.

Projects such as mBridge, a blockchain-based platform to directly connect jurisdictional digital currencies, has added to the view that a small but gradually rising fraction of international trade is being denominated in other currencies – particularly the Chinese renminbi.

There is also certainly a sense that smaller businesses, which often face greater challenges in securing access to the global trading system, would benefit from a wider availability of invoicing options in a less dollar-centric international monetary system. There are, however, deeper considerations at play.

Through tracing the uniqueness of the dollar standard and the provenance of its dominance, Research Fellow Stewart Paterson traces in this paper the evolutionary path of the global monetary system and assays the future of the greenback.

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Stewart Paterson

Stewart Paterson is a Research Fellow at the Hinrich Foundation who spent 25 years in capital markets as an equity researcher, strategist and fund manager, working for Credit Suisse, CLSA and most recently, as a Partner and Portfolio Manager of Tiburon Partners LLP.

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