Dollar could plausibly lose its global dominance

Subject

Questions over the future of the international monetary system.

Significance

The topic of primacy in the international monetary system is slippery, because the international monetary system in an era of nation-state central banks dates only from the late 19th century. There have been few changes in dominant-currency status in that time, making it difficult to be definitive about why currencies gain and relinquish top-currency status. Nevertheless, the advent of a heterodox US administration necessitates unorthodox thinking -- and the US currency is one place the new president could make his mark.

Impacts

• Numeraire-currency status is a double-edged sword; its loss would not be unambiguously bad for the US economy.
• The value of the dollar has been supported by numeraire status, arguably to the detriment of US trade.
• The danger in this scenario is in achieving a smooth transition to a new numeraire currency.