“Trump probably accelerates the drop in the dollar”

Economist Kenneth Rogoff, a professor at Harvard, has indicated that the supremacy of the US dollar is at risk due to a combination of internal and external factors, exacerbated by the economic management of President Donald Trump. Although Rogoff believes that the dollar will probably continue to be the main global reserve currency for at least a couple of decades, its influence could be reduced remarkably. The finance specialist also emphasizes that Yuan, the euro and cryptocurrencies are emerging as key competitors on the world.

However, the intellectual argues that the domain of the dollar had already been gradually falling before the arrival of the current president. He points out 2015 as a key year, since it was then that China began to make its currency more flexiblea strategy that allowed him to disconnect from the decisions of the US Federal Reserve. Rogoff also states that the sanctions imposed on Russia, in the context of the war conflict with Ukraine, accelerated the efforts of the Asian giant for unfolding, which could have repercussions on world geopolitics, especially in relation to a possible conflict over Taiwan.

The truth is that, although the dollar was consolidated as the main world reserve currency after the Bretton Woods agreement in 1944, its purchasing power has been sustained throughout the last century. Since the Federal Reserve Law was promulgated in 1913, the expansion of the money supply has been a key tool to face wars, crisis and deficits. However, that growth has been accompanied by persistent inflation. By illustrative way: With a dollar you could buy 30 chocolate bars in 1913, while half a century later it barely reached for an Autocine ticket.

Rogoff also emphasizes that the weakening of the US currency does not come only from external developments. The growing US debt. And the probable increase in interest rates are also putting pressure on the dollar. The economist provides that this situation will be aggravated if Trump’s economic policies continue to deteriorate confidence in the country’s financial system.

The teacher goes further and the issue of legal certainty is entered, since he considers that the lack of confidence in US laws, aggravated by Trump’s attacks on the independence of the Federal Reserve, could reduce the perception of security that for so many decades has characterized the US assets. According to Rogoff, internal economic uncertainty, added to Trump’s efforts Presidential, it is generating a sense of insecurity that could lead investors to look for alternatives to the dollar.

In addition, the expert states that The fragmentation of the global financial system is another factor that contributes to the decline of the US currency. Economies of Asia and Europe, traditionally aligned with the dollar, are taking measures to diversify their reserves and payment systems. The European Central Bank, for example, is working on the development of the digital euro, with which they hope to compete more effectively with the dollar.

Trump was not the one who started the decline of the dollar, but probably accelerates it considerably. In addition to dismantling a global trade system in which the United States benefited, it is undermining almost all other pillars in the domain of the dollar. Although it has reduced illegal immigration – which is positive – does not seem very interested in promoting legal immigration. It also seems determined to weaken research in the main universities of the country, which for a long time have been a key source of innovation and growth.

-Kenneth Rogoff, professor at Harvard.

According to Rogoff, although the dollar has historically prevailed against rivals such as the Soviet Union, Japan and the euro zone, current times are different. Without a correction in Trump’s commercial policies and a reduction in economic volatility, the economist believes that the fate of the dollar would come to an end.

Despite the supremacy that the dollar has had in recent decades, a Goldman Sachs report is shown in line with the opinion of Professor Rogoff, which stresses that economies such as China and South Korea are reflecting a clear impulse towards global disdoring. Specifically, recent efforts are highlighted to internationalize Yuan and its inclusion in cross -border digital transactions, as well as the renewed importance that the South Korean Won is reaping.