Will the world be satisfied using the USD as the dominant medium of exchange if we continue to debase it and better, faster cheaper alternatives become available?

Reserve currencies have been debased before and survived that, as long as it's gradual. And that it has been: rather to my surprise, one US dollar still buys are remarkable fraction of what it would have bought decades ago. The prices of some things have risen a lot, but the broad monetary buying power has held up pretty well.

The better reason to believe there is a finite lifespan to the dollar's dominance is this: most international trade is denominated in the currency of the buyer, or of the bigger economy if it's a big imbalance in size. Reserve currency weightings are based largely on trade weightings. All in all, it's a game of "follow the money". The Chinese economy is bigger than that of the US in constant price terms, and getting bigger, and they will be the buyer of a larger and larger fraction of global goods. If at any point they stop doing things to make the RMB unusable, that would be a natural direction of travel.

Jim

Berkshire Hathaway FAQ

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