Ho-fung Hung in Sidecar:
Every time the global economy plunges into turmoil, talk of the coming end of dollar hegemony resurfaces. In March 1978 – in the wake of the collapse of the Bretton Woods system and amid stagflation in the United States – the New York Times published an op-ed by Soviet economist Stanislav M. Menshikov, ‘A Marxist Look at the Dollar Crisis’. Accompanied by a cartoon of a bear in Red Army uniform examining a dollar bill with a magnifying glass, the article proclaimed that the contradictions and crises of US monopoly capitalism were bringing the dollar’s global dominance to an end, and that major economies had begun to move towards gold and more secure currencies as stores of value.
The 2008 financial crisis, Russia’s invasion of Ukraine, Trump’s tariffs and threats to invade US allies, and the ongoing war with Iran have all inspired similar predictions that the world’s patience with the postwar monetary order is running out. It seems logical that no major players in the world economy would want to remain dependent on the currency of an erratic power for its trade and savings. The US dollar’s status as a fiat currency – it has not been backed by any precious metal since Nixon ended the dollar’s gold convertibility in 1971 – has long been viewed as fragile, given the United States’s deteriorating current-account and fiscal deficits. Yet the dollar remains the most widely used currency in global trade and finance, with the euro a distant second. Although China has become the second-largest economy and ‘workshop of the world’, international use of the Renminbi remains tiny by comparison, trailing far behind even the British pound and Japanese yen – disappointing those who argue that the RMB is on the verge of becoming the next hegemonic currency.
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