Editor’s Note: Guest columnist Daniel McDowell is filling in this week.
The dollar’s status as the global reserve currency is in grave danger—at least that’s what a growing chorus of pundits and observers are saying. The U.S. government has embarked on a debt-driven spending spree as the country grapples with the COVID-19 pandemic and its economic repercussions. This explosion of U.S. borrowing, combined with more “money printing” by the Federal Reserve, has led mega-investors, hedge fund managers, economists and elite financial institutions to sound the alarm in recent months.
America’s fiscal and monetary policy efforts to prop up the economy amid the pandemic, these doomsayers argue, are doing long-term damage to the dollar. Further “debasement” of the currency will lead to rising inflation, dollar depreciation and ultimately a collapse of global confidence in its stable value. When that happens, they warn, global investors will flock out of the dollar into other, more stable currencies—a list that usually includes the Chinese renminbi, also known as the yuan.