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Robert Burgess

Dethroning King Dollar Won’t Be an Easy Feat

There is no alternative to the world’s reserve currency despite any concern or wishful thinking to the contrary.

The king is alive. Long live the king.

The king is alive. Long live the king.

Photographer: Dimas Ardian/Bloomberg

If the last dozen years or so has taught us anything about markets and the economy, it’s that anything can happen, no matter how unlikely. The U.S. housing market was considered as solid an investment as there ever was because prices never fell nationally — until the subprime crisis came along. The idea that the European Union would ever come close to breaking apart and taking the euro with it was unthinkable — until Greece defaulted. And everyone knew that inflation like that of the late 1970s was never coming back — until the pandemic snarled supply chains worldwide.

So it’s natural that a sort of cottage industry has sprung up in the last decade or so trying to anticipate the next so-called black swan event that could upend the global economy and markets. As my Bloomberg News colleagues Joe Weisenthal and Tracy Alloway do a good job of explaining, there is a growing concern that perhaps Russia’s invasion of Ukraine could mark the beginning of a turning point for the U.S. dollar — and not for the good. The thinking is that the U.S. has “weaponized” the dollar through heavy financial sanctions imposed on Russia, including preventing that country’s central bank from accessing its foreign currency reserves.  “As such, it may make less and less sense for global reserve managers to hold dollars for safety, given that they could be taken away right when they’re most needed,” they write.