America’s perceived downward spiral, greatly accelerated by trump, may well lead to a truly multipolar economic world, where foreign banks increase the value of other currencies from the world’s most stable countries financially.
Central banks around the world are holding more and more diversified currencies from countries with strong economies.
All these currencies provide diversification benefits to central banks, via exposure to small but open economies. And advance in digital trading technologies have made it easier than ever before to hold these assets.
America now has challengers, even if they have failed to gain ground against the dollar. The EU bloc’s economy is large, but the problem in Europe is the capital markets are not integrated. Another issue has been the credit rating of many of the Eurozone’s members.
In addition, the region’s pool of assists according to Professor Barry Eichengreen, and International Economist , at UC Berkeley, “is not deep enough to liquid enough to support a large role for the Euro as a international reserve currency.
The Potential Tipping Point
As the global financial system rebalances, away from the U.S. dollar, this could dramatically accelerate, if a dramatic event eliminates the confidence in the U.S. dollar assets.
What might that be?
The U.S. fiscal situation and its unsustainable level of debt. America’s unsustainable trajectory could well swell to 172% by 2054. https://www.gbm.hsbc.com/en-gb/insights/market-and-regulatory-insights/the-future-of-reserve-currencies-in-a-multipolar-world
Trump’s arrogance and his massive cuts for billionaires may cripple America with debt, now at 42 Trillion dollars. Based on Trump’s previous performance and the addition of another 8-10 Trillion dollars of debt, America is likely to see its economy come under severe pressure, as debt servicing will soon eat up as much as the U.S. military budget.
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