The end of the dollar as the world’s reserve currency has been predicted so many times that it is tempting to nod along with Jay Powell, Federal Reserve chairman, who pronounced last week that there is no immediate threat. But with high inflation in the US and China cuddling up with Russia, is it something the world should be taking seriously?
If the dollar was dumped then it would have serious consequences for the global economy. The status of the dollar allows the US to borrow much more cheaply than other countries, allowing it to sustain public debt of more than 100 per cent of GDP for the past decade. If that were to unwind, it would push up the cost of servicing US debt.
Recent developments have made some analysts uneasy. It doesn’t help that American banks have been failing and that Joe Biden has been helicoptering money into households.
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