"The dollar has not always been the world’s reserve currency or the currency of choice for international trade. In the nineteenth century, it was the pound sterling that enjoyed that status, and British financiers would have felt secure in its reign. The United Kingdom had deep, liquid capital markets, and the British Empire was the world’s largest economy and the central player in global trade. Yet after two world wars and decades of political and economic decline, London watched as sterling’s global status ebbed away. There was nothing inevitable about the pound’s slide or the dollar’s emergence, just as there is nothing inevitable about the dollar’s potential demise today. Choices, not destiny, determine reserve currencies; if the dollar is finally dethroned, it will be a disaster of the Trump administration’s own making.
A serious impediment to adoption of the Chinese renminbi is the rule of law, or rather the lack of it: companies would rather end up in an American courtroom than a Chinese one any day of the week. Should this U.S. advantage erode, the results could be catastrophic."
The biggest takeaway here, really, in spite of the title, is the ongoing dominance of the dollar in the global economy. It will not go down easy and has a long way to go before being dethroned. Nearly half, 45-50%, of all global financial transactions are in US dollars; 22% Euros, 4-7% Japanese yen and British pounds, and then more Canadian and Australian dollars, the Chinese yuan/renminbi, and the Swiss franc in the low single digits. Business people especially like old reliable ways of doing things that work, reliable ways of conducting their business, and for going on eight decades, going back to the Bretton Woods conference after WW2, the Keynesian dream of stable, expanding, prospering global markets running on dollars have more or less worked; surviving Nixon abandoning the gold standard and several banking crisis, including the Great Recession of 2007-2009. The book Underground Empire tells the story of the US weaponizing the Swift system for facilitating global transactions after 9/11, the electronic plumbing undergirding nearly all global financial transactions today. You'd think this would have increased alternative systems of currency exchange. And it has in Crypto, for a popular instance; primarily for money laundering and tax evasion, apparently. But in fact global dollar transactions as a share of all global financial transactions has grown by 10-15% since the Bush era. It is generally recognized most every where else in the world that Bidenomics led the strongest economic recovery after Covid but this wasn't persuasive enough for the US electorate. But now can the US dollar standard in global trade survive Trump? Remember, this is a guy who bankrupts casinos, which people say is extremely hard to do. This is a guy for whom dominance is everything; and zero sum dominance displays his single-minded conception of the "art of the deal." If anybody can dethrone the dollar Trump can.
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