That is the question that the London-based Financial Times poses in an extensive April 17 article which asks: “Is the world losing faith in the almighty U.S. dollar?” The British Establishment is not opposed to switching to some other financial instrument, so long as they can continue to run the world, but they are concerned that there are no alternatives in sight, and that they might lose control altogether.
“The Nixon shock,” the FT happily recalls, “helped usher in a new age of freely traded floating currencies, rapid credit creation and global capital flows, untethered by gold and increasingly unrestricted by governments.” That’s the world of unbridled speculation which the City of London and Wall Street love. But now, “more than half a century later, the world is grappling with a shock of similar magnitude,” which they dub the “Trump shock.” They quote Mark Sobel, U.S. chair of OMFIF, a financial think-tank, and a former senior Treasury official: “Being a trusted partner and ally is a key pillar of the U.S. dollar’s dominance, and has been tossed to the wind.”
As a result, the dollar has been declining in value, and it is becoming harder to sell Treasuries. “If the outflows gather pace, could it eventually even erode the dollar’s unique role in the global economy and financial system?” the FT asks. “Some analysts and investors now think the scale of the Trump shock could end a near-century of dollar dominance.… ‘The U.S. has benefited from reserve currency status for 100 years. It’s taken less than 100 days to unwind it,’ says Gregory Peters, co-chief investment officer at PGIM Fixed Income. ‘It’s a very big deal.’”
