NEW YORK, Apr 8 (NNN-XINHUA) – The U.S. dollar will play a much less dominant role than it is today, within the next ten years, due to a smaller share of the U.S. economy in the world, weaponisation of the U.S. dollar and the use of central bank digital currencies, said a renowned U.S. economist yesterday.
The share of the United States in the world economy will be less and the role of the U.S. dollar will naturally diminish, because other currency settlements will take a hold, said Jeffrey Sachs, an economics professor and director of the Centre for Sustainable Development at Columbia University, at the 15th Annual Columbia China Summit.
Speaking at an online session of the meeting, Sachs noted that, the international payment system now is based on U.S. dollar, with 50 percent to 60 percent of international trade settlements based on U.S. dollar or denominated in U.S. dollar, and about half of international reserves based on U.S. dollar.
The U.S. share of the world economy in purchasing terms is around 15 percent, so the role of the U.S. dollar is far larger than the role of the U.S. economy, and the role of the U.S. dollar is a kind of historical role, said Sachs.
The role of the U.S. dollar reflects the power of the U.S., especially in the 20th century, added Sachs.
As the U.S. dollar became a political weapon by the U.S. in confiscating foreign exchange reserves of Russia, Venezuela and Iran, lots of countries don’t want to keep their money in dollars anymore.
This is because “they don’t trust the U.S. and they think the U.S. is going to confiscate their money, especially if they get in some kind of foreign policy disagreement with the U.S.,” Sachs said.
Moreover, the role of the U.S. dollar is based to a significant extent on the U.S.-dollar-based commercial banking system, as the payments are largely settled through commercial banks.
In future, payments are going to be settled digitally through central bank digital currencies.
Digital renminbi, which is an experiment now at the retail level within China, will end up being an international payments system settlement, Sachs said.
Over the past month, Russia, China, Saudi Arabia, India and South Africa are all looking for alternative payments, because they don’t want to use the U.S. dollar banking system and it’s understandable, he said.
The role of the U.S. dollar will diminish and the role of the renminbi, the rupee, the ruble and other currencies will rise in the future, said Sachs.– NNN-XINHUA