Bruegel 37d ago

🔴 "So I think we're at a very interesting juncture, Rebecca. On the one hand, people realise that the dollar remains the dominant global currency, that it's involved in 90% of foreign exchange transactions worldwide, that it accounts for a majority of the foreign reserves of central banks and governments, despite the fact that the US is, at most, depending on how you measure it, 25% of the world economy.⁠ ⁠ 🟠 At the same time, there is an increasing amount of chatter around the prospects of the dollar going forward. There are questions about the economics, is US public debt sustainable? There are questions about the politics, about separation of powers, rule of law, independence of the Fed, how can we reconcile the stability of the dollar for the moment and these growing questions about the future?⁠ ⁠ 🟡 The analogy I increasingly like is that of an iceberg, which melts very, very slowly. That's what's been happening, if you will, over the last quarter century, as other currencies very gradually gain market share at the expense of the dollar. And what may happen in the future, you know, an iceberg melts gradually until a chunk calves off all at once. And I think there is the danger that that could happen going forward."⁠ ⁠ 🗣️ Barry Eichengreen in conversation with Lucrezia Reichlin and host Rebecca Christie.⁠