The Fed Is To Blame For The Dollar’s Recent Weakness. Still, There Is No Fiat Alternative…
22nd July 2025
There are plenty of comments about the death of the US dollar as the world’s reserve currency. These tend to appear when the dollar index declines. However, these “dollar death” reports are greatly exaggerated and fail to answer a simple question: What is the alternative?
If you want to bet on the euro as a global reserve currency ahead of the imposition of the digital euro, which will obliterate all limits to central bank surveillance and excess, be my guest.
Furthermore, the enormous military spending and public expenditure plans that have been announced in 2025 add to the giant committed unfunded liabilities of member states, moving from 350% in the case of Germany to 500% of GDP in the case of Spain.
The Chinese yuan is only used in 4.5% of global transactions. With capital controls, exchange rate fixing and significant legal and investor insecurity due to government control of institutions, it is difficult to believe that China’s yuan will be an alternative to the US dollar. Additionally, I do not believe that the Chinese government wants to eliminate those barriers and, as such, has no desire to be a world reserve currency. This is a similar problem with the currency of Brazil, Russia, India, or South Africa. Would you accept your salary and savings in a currency issued by countries with capital controls as well as significant legal and investor security challenges?