America’s pandemic policies and the broader response to Russia’s war on Ukraine have unleashed widespread speculation about the future of the US dollar’s global hegemony. Yet one should not assume that a more divided world will automatically give way to a more multipolar one, especially where reserve currencies are concerned.
TORONTO – In this new era of geopolitical upheaval, business leaders, politicians, policymakers, and academics are anticipating a more fragmented, multipolar world order, with many predicting especially consequential changes in the international monetary system. America’s pandemic policies and the broader response to Russia’s war on Ukraine have triggered widespread speculation about the future of the US dollar’s hegemony, and while warnings about the eclipse of the greenback are not new, some commentators believe that this time is different.
True, high inflation, rising US public debt, and other key developments are unfolding in a strategic environment that is increasingly reminiscent of the Cold War. The most striking parallel is the return of great-power rivalries and policymakers’ preoccupation with security concerns, which are taking precedence over economic efficiency. But while the elevation of security issues is clearly reshuffling some alliances and economic relationships, it is unlikely that these changes will usher in a multipolar currency system in the foreseeable future.
The biggest problem with the narrative about fragmentation and an inexorable drift toward multipolarity is its imprecision. The term “multipolarity” is rarely defined; and even when it is, it is used inaccurately. Moreover, one should not assume that a more divided world will automatically give way to a more multipolar one, especially where reserve currencies are concerned.
TORONTO – In this new era of geopolitical upheaval, business leaders, politicians, policymakers, and academics are anticipating a more fragmented, multipolar world order, with many predicting especially consequential changes in the international monetary system. America’s pandemic policies and the broader response to Russia’s war on Ukraine have triggered widespread speculation about the future of the US dollar’s hegemony, and while warnings about the eclipse of the greenback are not new, some commentators believe that this time is different.
True, high inflation, rising US public debt, and other key developments are unfolding in a strategic environment that is increasingly reminiscent of the Cold War. The most striking parallel is the return of great-power rivalries and policymakers’ preoccupation with security concerns, which are taking precedence over economic efficiency. But while the elevation of security issues is clearly reshuffling some alliances and economic relationships, it is unlikely that these changes will usher in a multipolar currency system in the foreseeable future.
The biggest problem with the narrative about fragmentation and an inexorable drift toward multipolarity is its imprecision. The term “multipolarity” is rarely defined; and even when it is, it is used inaccurately. Moreover, one should not assume that a more divided world will automatically give way to a more multipolar one, especially where reserve currencies are concerned.