Jeffrey Sachs: Weaponization and Digital Currencies Will Weaken the Dollar’s Role
Renowned economist Jeffrey Sachs predicts that the role of the U.S. dollar will become less dominant over the next decade due to various factors such as its use as a political weapon by Washington, the introduction of digital currencies like the Chinese digital yuan, and the shrinking share of the global economy held by the U.S. Sachs notes that the current international payment system is based on the dollar, with up to 60% of foreign trade settlements conducted in the U.S. fiat, and around half of currency reserves based on it. However, the U.S. share of the global economy is only around 15%, which means the role of the dollar is far larger than the role of the U.S. economy.
Sachs predicts that the role of the dollar will decrease as the share of the United States in the global economy becomes smaller and settlements in other currencies take hold. He also notes that with the U.S. turning its currency into a political weapon by confiscating foreign exchange reserves of other countries, many nations no longer want to keep their money in dollars. Sachs believes that payments will eventually be settled through central bank digital currencies (CBDCs), and that the role of currencies like the renminbi, the rupee, the ruble, and other currencies will increase in the future.
The economist also points out that the current role of the U.S. currency is largely due to the dollar-based commercial banking system as the payments are usually settled through commercial banks. However, Sachs is convinced that in the future, CBDCs will become the preferred method of payment settlement. China’s digital yuan (e-CNY) is already undergoing trials at the retail level within the country and Sachs believes that it will eventually become an international payment system for cross-border settlements.
Sachs is known for his work as an economic adviser to governments from Latin America to Eastern Europe, where he supported the transition to market economies. While he criticized Bitcoin for offering “nothing of social value” two years ago, he acknowledges some of the benefits of using digital currencies, including more efficient transactions.
Clever Robot News Desk 11st April 2023