“Is A Dollar Crash Coming?”

And from Mark Sobel (OMFIF):

The RMB is a good candidate for appreciation. But China has an extremely weak financial system and is increasingly authoritarian. Despite increased inflows into Chinese bonds and stocks, major capital account opening runs the risk of massive outflows, depreciation, and financial instability. Chinese property protections leave much to be desired.

A major U.S. policy mistake undermining macro stability or the dollar’s reserve currency properties could sow the seeds of dollar demise. Excessive unilateral use of financial
sanctions could weaken the dollar over the longer haul.

But there are now no alternatives. One day the soothsayers of doom may prove right. In the meantime, the repeated prophesies are tired.

But Adam Posen (President, PIIE) warns:

What would make the U.S. dollar crash beyond this downward adjustment in its international financial role is domestic political breakdown. Public debt levels and even current account deficits do not matter much for a large high-income democracy in and of themselves, so
long as people believe that taxes can be raised if needed. That probability is what has kept the Japanese economy afloat even as public debt levels went above 200 percent of GDP. If due to a contested election or a divided partisan Congress the United States repeatedly cannot pass budgets in 2021, that portends badly for the dollar, just as it
would for any other economy.

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Comments

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Steve W 2 months ago Member's comment

These are terribly worded sentences:

"The foregoing does not mean the dollar’s role might not be eroded by the rise of regional currencies. In fact, that outcome seems inevitable, eventually. Nor does it mean that the value of the U.S. dollar might not decline as macro factors wax and wane..."

Way too many uses of the word "not". It's not clear what you mean. I think you meant to say:

"The foregoing does not mean the dollar’s role might be eroded by the rise of regional currencies. In fact, that outcome seems inevitable, eventually. Nor does it mean that the value of the U.S. dollar might decline as macro factors wax and wane..."

I removed the second "not" in both sentences. Is that the meaning you are trying to convey? Of course, I might not not be correct.

Anne Barry 2 months ago Member's comment

Makes more sense that way. Thanks.

Flat Broke 2 months ago Member's comment

I certainly hope not!