No. of Recommendations: 10
So a slow decline over 50 - 100 years.
But we live in a much faster world now. I don't think it will take that long. What is your time frame?
I have no time frame. In fact I don’t even have a prediction. The US could continue to be the reserve currency for another 100 years, or it could end by 2030, there’s no way to know. It’s “the future” which only makes itself understood as it arrives.
There isn’t a formal “Board of Reserve Currency” or anything, it’s a determination made by the millions of transactions in the market by millions of individual actors, all looking to make their life easier (consonant with safety, trust, etc.)
I have wondered if that attribute could ever be “transferred” to a sovereign like China, given the opaqueness of their internal financial machinations - but then they are becoming a monster industrial powerhouse and it would make sense for some, at least, to begin trading directly in their currency rather than gyrate through currency exchange into dollars, then in yuan, or whatever the particular sequence might be for that actor.
Now I’m not so sure that the insularity of China and its command structure is such a big deal. After all, Spain was the reserve currency and they had a Monarch at the time, which could be just a capricious. And the US is whipsawing on issues of financial stability (tariffs, penalties, closing borders, penalizing foreign investment, etc) so we’re not exactly the paragon of rectitude one might want.
Spain lost its status in the 18th century due to fiscal mismanagement, inflation, and lack of trust which the rest of the world demonstrated by moving to the gold standard for a time. Then came England and the Industrial Revolution, and its industrial might so huge that it was easier to trade in Pound Sterling than gold; they lost the “reserve” title when World War II bankrupted them and the US became the predominant producer of finished goods as well as commodities. Everybody wanted to trade with US, Britain was left in the (literal) dust.
Surely that will happen to the US at some point, whether Trump can manage to damage the US economy and trust in just a couple years remains to be seen, whether China earns enough “trust” so investors are comfortable parking their financial assets in that currency likewise is unknown.
I have no timeline. I don’t even predict that it will be China next, although that seems a good bet. I just don’t know. Nobody does, really.
