My Take | The end of the US dollar as we know it?

As ordinary Russians feel the heat from the still mighty dollar turned hostile, pundits cannot agree on the future of the greenback

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Published: 9:21pm, 18 Apr 2022

Will the US dollar lose its dominant status in global finance? This question has been asked for decades, probably as early as when the old Bretton Woods system of fixed exchange rates was thrown off the gold standard at US$35 for an ounce of gold by the Richard Nixon White House in the early 1970s. But the question had concerned mainly economists and politicians, while being literally academic for most people.

Now, though, it is on many people’s minds, thanks to the Russian-Ukrainian war and Washington’s financial warfare. Many ordinary Russians suddenly find they can’t access Visa, Mastercard, American Express, Apple Pay and Google Pay. Foreign goods and services have become limited, prohibitively expensive or completely unavailable. The banks they use can’t help them make overseas business transactions or money transfers, because they have been cut off from Swift, the global messaging system for international payments.

While this has been a demonstration of America’s financial prowess and that of its Western allies, many pundits consider weaponising the global financial system and the US dollar amounts to abuse and will lead more countries, including friendly ones, to seek alternative systems.

Will this eventually lead to the end of the US dollar’s dominance? Experts have answered yes, no, and maybe. Rather than seeking a definitive answer, which is simply unavailable, it’s worth considering the different schools of thought.

The dollar dominance will erode

Former chief of the Hong Kong Monetary Authority (HKMA) Joseph Yam Chi-kwong has been the rudest critic. The US government had “weaponised” the financial markets, a “stupid and crazy” strategy that would undermine the US dollar’s status as the world’s reserve currency, he said in a webinar run by the research unit of the HKMA.

“First of all they put restrictions on Chinese enterprises’ financing in the US, and stopped Americans investing in Chinese enterprises at the same time. These are like capital controls or restrictions on people to use the US dollar or the international financial infrastructure. I think the Americans are getting crazier in this regard.”