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The US dollar is the backbone of global trade and held by governments around the world as a safe haven in times of crisis.
It’s so powerful that countries like Ecuador and Panama have adopted the dollar as their official currency, while Argentina for many years has tried to “dollarize” its economy.
But what happens if nations and private institutions were to lose trust in the dollar?
How did we get here? Well, after WWII the world order was re-established in part by tying the monetary systems to the value of the dollar, backed by gold. But since 1971 President Nixon cut that link to gold and the entire exchange system has since been tied directly to the dollar itself, its historic success and access to its financial markets.
That success gave America what was dubbed an “exorbitant privilege” to print money without fear of inflation and to build up national debt without consequence.
It also enables the US to flex its muscles on the international stage by imposing sanctions on countries and cutting off access to their all-important currency. That has led some countries, most notably China, to call for the dollar to be replaced as the world’s reserve currency.
How difficult would it be to untangle the dollar from global trade, can any other nations offer the same conditions which has allowed the US currency to thrive, and what would happen if the dollar’s role was replaced by newer digital currencies which operate outside traditional government control?
Presenter: Professor Ben Ansell
Producer: George Dabby
Editor: Damon Rose
Contributors:
Martin Wolf, Chief Economics Commentator at the Financial Times
Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley
David Shrier, Professor of Practice, AI & Innovation with Imperial College Business School
Stephanie Flanders, Head of Economics and Politics at Bloomberg News
Zanny Minton Beddoes, Editor-in-Chief of The Economist
Material from:
British Pathé, “Bretton Woods Money Pact Signed” (1946)
