ExclusiveWhy Kenneth Rogoff thinks China’s yuan will be a reserve currency ‘in the next 5 years’
Harvard economist explains why cryptocurrencies will never take the US dollar’s place, despite their popularity in underground economies
Professor Kenneth Rogoff of Harvard University has repeatedly warned that the US dollar is approaching a crisis of legitimacy. Having written extensively on the global recession in the late 2000s, Rogoff has turned his focus to the US currency’s increasingly unstable place at the top of the world’s financial hierarchy. A former chief economist at the International Monetary Fund and a chess grandmaster, he published Our Dollar, Your Problem in May last year.
In this interview, Rogoff elaborates further on the US dollar’s competition from the yuan and euro, the race among global policymakers to reduce their dependency on the US currency, and how the rise of cryptocurrencies factors into future developments.
The fact that the Chinese president recently and explicitly called for making the yuan a global reserve currency is an extremely important moment.
In my experience over a couple of decades, some of which I talk about in my book, China’s technocrats have long wanted to make the yuan more independent of the US dollar. They have long recommended that, given China is a large country, it needs to have its own independent monetary policy.
However, at the very top, the president and the premier have typically opposed this. They did not want to take the risk of making a change in the US dollar policy simply because China was doing so well. Why change anything? Why rock the boat?