Latest news with #OurDollar
Time Magazine
26-06-2025
- Business
- Time Magazine
What the U.S. Dollar's Dip Means For You
Americans' wallets could be set to take a hit as the U.S. dollar has tumbled to a three-year low amid concerns about the stability and strength of the country's economy. The dip could aid domestic businesses that export U.S. goods, but will make international travel and imports pricier for Americans. The U.S. dollar has already lost about 10% of its value this year, in contrast with the euro, which reached its highest level in nearly four years after gaining 0.4% on Tuesday. The devaluation of the dollar, the world's dominant reserve currency, on Thursday came after news outlets reported that President Donald Trump is considering announcing a new Federal Reserve Chair this fall, ahead of the end of current Chair Jerome Powell's term. The Wall Street Journal first reported the news on Wednesday. The Fed has faced pressure from Trump to lower borrowing costs, but has stopped short of doing so in order to assess the potential impact of the President's tariffs and keep unemployment low. In addition to Trump's tariffs, his 'Big, Beautiful Bill' has contributed to uncertainty surrounding the U.S. economy. Economists have warned that the legislation could add more than $2.5 trillion to the federal debt, despite claims by the Administration that it would save money. Here's what to know about the weakening dollar. Why did the U.S. dollar fall? A number of factors contribute to the value of the U.S. dollar, among them how in demand it is from central banks and other financial institutions. The country's broader fiscal situation, including inflation rates, trade relationships, debt, and trade deficits, also play a role. As economists have warned about a potential U.S. recession or economic slowdown, investors have pulled back on investing in the U.S. 'The institutional quality that the U.S. had in terms of being a safe haven has been really undermined,' says Bilge Erten, a professor of economics at Northeastern University. 'Why would you invest in U.S. assets when you know that the U.S. dollar is likely to continue to lose value?' Trump and his policies have contributed to many of the concerns raised about the economy in recent months. Some experts, however, say that while political factors help shape the strength of the U.S. dollar, its devaluation was projected to occur regardless of the winner of the 2024 presidential election. 'No matter what happened, there was a high chance that the dollar was going to fall, and I think it's going to fall further,' says Kenneth Rogoff, a Harvard professor and author of Our Dollar, Your Problem: An Insider's View of Seven Turbulent Decades of Global Finance and the Road Ahead. Rogoff, who predicted the fall of the U.S. dollar in his book, argues that its dip in value is part of its typical fluctuation. 'It had reached a high we had only seen in 2002 and 1985 and both of those times, it fell very sharply in the ensuing years,' he says. The dollar most recently saw a spike in value around 2015, though it deteriorated during the COVID-19 pandemic, before rising again. Its recent high rate meant that it was projected to fall in the years to come, according to Rogoff. That's not to dismiss the role that Trump's policies may be playing, however. Rogoff points to the President's sweeping 'Liberation Day' tariffs as a policy that he says 'accelerated the process.' 'Trump can absolutely make the dollar go down by saying, 'I'm going to tax investors if they come into the United States,' which is in the Senate Bill. That's obviously going to discourage money. It's going to drive down the dollar. So there are lots of ways to play with it,' Rogoff says. How will the dip in the U.S. dollar impact Americans? The dip in the U.S. dollar means that its exchange rate is less strong, making international travel more expensive for Americans. The prices of imported goods will also be higher, experts warn. 'When someone from Europe is selling to the U.S., they're going to take [the dollar's devaluation] into account, because once they convert what they get in dollars into euros, they're getting less,' says Erten. 'That means they have to sell it at a higher price to get the same value.' Companies that export U.S. goods, however, may benefit from a more competitive edge. The dollar's lowering value means that the cost of American goods and services will decrease in price when taking into account the exchange rates. 'Services that U.S. workers compete for will cost less,' says Rogoff. In that respect the fall of the U.S. dollar may work to the advantage of Trump, who has vowed to bring back manufacturing jobs to the U.S. On the other hand, the labor market, which has already become increasingly challenging, might be impacted. A reduction of foreign investments into the U.S. could lead to more unemployment, which currently stands at a low 4.2%, according to the U.S. Bureau of Labor Statistics.
Mint
24-05-2025
- Business
- Mint
Ken Rogoff on How Crypto Is Infiltrating the Dollar's Hegemony
(Bloomberg) -- From the International Monetary Fund to the Federal Reserve, Kenneth Rogoff has spent years inside the institutions that helped shape the dollar-led global economic order. Now, he warns that the dollar's dominance can no longer be taken for granted. In his new book, Our Dollar, Your Problem, the Harvard economist argues that the rise of China, geopolitical tensions and the growing influence of cryptocurrencies are chipping away at the greenback's global standing. In an interview with Bloomberg News, Rogoff spoke about why digital currencies, once dismissed as a fad, are here to stay. The conversation has been edited for brevity and clarity. Q: Why did you include a chapter on cryptocurrencies? A: We're thinking about the future, not just the past. So the book is a sweeping history of the rise of the dollar post-World War II, including how it managed to reach such a high level and how its competitors fell by the wayside. But it's not simply that the dollar became first, but became more dominant than any other currency has ever been. And I see it as in decline — it's fraying at the edges where, of course, the renminbi is breaking free of the dollar, the euro is going to have a larger footprint — that's been going on for a decade. But there's also crypto, because one of the dollar's main markets is the world underground economy. And there, the government does not control things. One of the first questions many people ask is can crypto replace dollars? Crypto can't replace the dollar. But that's in the legal economy where the government has a lot of leverage. But in the underground economy, by definition, it has much less leverage. Q: What is the underground economy? A: It depends on the country. The lion's share is tax evasion. Tax evasion is massive all over the world. The average in the advanced economies is between 15-20%. The United States is one of the lowest — lower than 15%. But in most advanced economies, particularly in Europe, it's much higher. And in developing economies, it's a third of GDP. There's sort of a gray area between what's illegal and what's tax evasion, sometimes they overlap. But a lot of it is what some people might call the gray market, the shadow economy. You don't pay taxes on your nanny, people sometimes pay their painter in cash, their trainer in cash. There are people who pay for apartments in cash. Of course, there's also arms dealing, human trafficking, drugs, etc. But illegal activity's very important, but it's quantitatively much smaller than tax evasion. Q: You argue in your book that Bitcoin has already cut into the dollar's dominance. A: Yes, although crypto has not made significant inroads into the legal economy, it is increasingly used in the global underground economy – consisting of criminal activity but mainly tax and regulatory evasion – where cash, especially US dollars, had been king. The notion that there is no 'fundamental value proposition' in transactions use is just wrong. There are also many countries using crypto to evade US financial sanctions. Q: What are the implications of this? A: The underground global economy is perhaps 20% of global GDP — per my own research and per a World Bank literature survey. This is a big market where the dollar has been particularly dominant. Q: How does crypto cutting into the dollar's dominance raise interest rates for all of us? A: A lower demand for dollars in the global underground economy raises US interest rates, though it is only one of many factors today pushing up rates. The United States' 'exorbitant privilege' — thanks to being by far the most important reserve currency – affects all our interest rates, not just the Treasury bill rate, including mortgages, car loans, student loans, etc. Q: And the second implication is national security? A: In general, a loss of market share of the dollar makes it more difficult for US authorities to monitor financial flows for information that helps preserve national security. Dollar dominance also allows us to impose sanctions. To the extent there is simply a substitution of crypto for paper dollars that were already nearly impossible to trace, there is no new issue. To the extent crypto allows new ways to cloak transactions that had previously gone through normal financial channels, the national security implications of the information loss are much more significant. This challenge is all the more difficult for US regulators to reign in, given that large parts of the rest of the world resent what they see as excessive US control over the financial system, one of the main reasons that we are likely to see continuing diversification away from dollar markets toward other transactions vehicles, something Our Dollar, Your Problem discusses at length. Q: And will crypto's dominance continue to grow? A: Absolutely. Crypto's going to continue taking over the global underground economy on transactions. There are people who think that crypto is going to go to the moon, but there plenty of people — Paul Krugman, Nouriel Roubini, Jamie Dimon, Warren Buffett — who said pretty recently that they think crypto is just a scam. In the crypto chapter, I explain why that's completely wrong. Because if the underground economy is 20% of global GDP that makes it — depending on the value of the dollar — a $20-to-$25 trillion economy. And if you're providing the means of exchange, that's a value proposition. Crypto has value. It's used for transactions. There's a big piece of the economy, which even if crypto's heavily regulated, the government is going to have difficulty controlling. So it's not worthless. There's a lot at stake there. More stories like this are available on
Bloomberg
15-05-2025
- Business
- Bloomberg
Bloomberg Surveillance: Tariffs and the Dollar
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney May 14th, 2025 Featuring: 1) Ken Rogoff, professor at Harvard University and former IMF Chief economist, joins for a two block, extended discussion on his new book, "Our Dollar, Your Problem," the "exorbitant privilege" of the dollar as the global reserve currency, and how the Trump administration is expediting the unseating of the dollar's position on the global stage. Ccurrency-centric headlines out of South Korea suggest that the dollar's consolidation this month may be imperiled if signs grow that the US administration is now shifting focus from trade to exchange rates. At the heart of the Dollar Index's immediate decline is a lingering concern that the Trump administration may pursue policies that involve countries selling the dollar to cure perceived economic imbalances stemming from a strong currency. 2) Wei Li, Chief Global Investment Strategist at BlackRock, joins for an extended discussion on tariffs causing further contractions, a US stock rally, and the fear of sticky US inflation. The stock recovery in stocks got an extra boost this week after the US and China cut trade tariffs, US inflation slowed, and earnings came in better than expected. Wall Street strategists are skeptical about how much further stocks can run. 3) Lindsay Rosner, Head: Multi-Sector Investing Goldman Sachs Asset Management, talks about signs of bottoms up in the credit world, upside inflation risks, and consumer strength's effects on economic growth. The yield on 10-year Treasuries advanced one basis point yesterday and the Bloomberg Dollar Spot Index fell as the Federal Reserve is expected to stay put in evaluating potential implications of tariffs. 4) David Bailin, CEO at CIO Capital and former Chief Investment Strategist at Citi, brings us into the market open and talks about his belief the US could enter a "Compression Recession" that could blindside everyone. Tensions around President Trump's trade war cooled and inflation data showed limited impacts, but there could be underlying risks to the economy. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including an NYT story on rival nations recruiting talent cast aside by American universities and a WSJ story on workers feeling overpaid.
Axios
09-05-2025
- Business
- Axios
The dollar's reserve status at risk
The United States is ripping up longstanding trade arrangements, developing more hostile relationships with allies, and undermining independent institutions, all while rapidly running up more debt. The big picture: That's a recipe for the role of the U.S. dollar as global reserve currency — unquestioned since the end of World War II and at a high-water mark just a decade ago — to fade. So argues Ken Rogoff, the Harvard economist and former chief economist at the International Monetary Fund, in a conversation with Axios and in his new book "Our Dollar, Your Problem." President Trump's policies have accelerated that process, Rogoff argues, but it was already set in motion. State of play: When a company in Indonesia does business with one in South Korea, it probably transacts in dollars. When a country in the Middle East runs up huge surpluses from selling oil, it probably parks the money in dollar-denominated investments. And when a bank in Europe does business with a country that is on the outs with the U.S. government, it can face massive fines and risk losing access to the global dollar payments system. Alternatives to the dollar — the euro, the Chinese renminbi — have to this point not been true rivals, as neither offers the kind of deep and open debt markets and institutional frameworks that make them particularly attractive outside their home countries. Zoom out: There have always been aspects of this system that other countries don't like very much — hence the title of Rogoff's book. The U.S. sets fiscal and monetary policies based on its own interest, so countries tethered to the dollar are along for the ride, losing some control over their domestic economies. And the U.S. has used economic sanctions in recent years for an increasingly wide array of goals — in the view of rivals and even allies, acting as a geopolitical bully. That was already setting the stage for other countries to try to bolster their capacity to use other currencies for global commerce. The sense that the U.S. is an unreliable partner is turbocharging that process. What they're saying: "What's happening under Trump is an acceleration of where we were going," Rogoff tells Axios. "He's a catalyst and an accelerant. But I do think if [former Vice President Kamala] Harris had won, the risk would have been pretty big over a longer arc of time, say, five to seven years, than Trump has managed." "This isn't something that just turns overnight, but the rest of the world was already seeking more freedom from the dollar, and this lit a fire under it." "In order for the euro to become more important outside Europe, they need to expand their financial system, the banking networks, in a way that accommodates that, and ditto the Chinese. The Chinese are working very hard at that." The U.S. response to Russia's 2022 invasion of Ukraine lit a fire under the Chinese, Rogoff adds. "They saw what we did with sanctions and that we froze central bank assets." "They have open doors, not just from Russia and North Korea, but large parts of Africa, Asia and Latin America. They don't trust the Chinese, but they don't trust the Americans anymore, either." Several officials in Trump's orbit argue that the U.S.'s reserve currency status — the "exorbitant privilege," as it has been called — comes with a heavy burden and that it is high time for the rest of the world to pay for that. Top White House economist Steve Miran said recently that "our financial dominance comes at a cost." "While it is true that demand for dollars has kept our borrowing rates low, it has also kept currency markets distorted," Miran said. "This process has placed undue burdens on our firms and workers, making their products and labor uncompetitive on the global stage." Yes, but: Rogoff argues that the costs of dollar dominance are more subtle than that, and that the benefits the United States receives are considerable. "If you have a mortgage, you have something to lose, because the exorbitant privilege brings down all interest rates in the United States. Auto loans, student loans, it's a very direct effect," he says. "More subtle but important is when the next crisis hits, if we've lost our exorbitant privilege, we will not be able to borrow as much to fight it. The rest of the world looks in awe at how much the United States is able to borrow" in episodes like the COVID-19 pandemic and the 2008 financial crisis. "There's a national security element. A huge percentage of the global financial network essentially goes through U.S. regulators. The fact that we get all this information makes the U.S. able to ward off terrorist threats, allocate our intelligence services, and use sanctions in place of military interventions."
Yahoo
07-05-2025
- Business
- Yahoo
It's 'hard to see' how US avoids recession, economist says
00:00 Speaker A It's time now for today's strategy session. Over the past few months, President Trump's trade policies along with some other headwinds have weakened the US dollar against most major currencies, triggering doubt around the dollar's long-standing dominance. This combined with record debt levels could create a genuine financial crisis, according to our next guest. Joining us now to discuss Kenneth Rogoff, a former chief economist of the International Monetary Fund and the author of "Our Dollar, Your Problem". Ken, great to have you. Thank you for coming in studio. 00:25 Kenneth Rogoff Glad thank you for having me. 00:27 Speaker A We appreciate it. So, talk to me about the declines we've seen in the dollar. Was the dominance of the dollar already at risk prior to this administration? And what is that signaling to you? 00:37 Kenneth Rogoff So, the dominance of the dollar, and we're talking about not just the level of the dollar, which I will say is super high, still, even after coming down, but how much it's used in trade, finance, what have you, like English. Uh, it actually was coming down for about a decade, at least, by many measures that I look at. And I think there are a lot of reasons for decline. One is there's an appetite on the outside, particularly from China and parts of Asia, but Africa, parts of Asia, uh, uh, Russia, obviously, but Europe too, to have other options, not just for what things are denominated in, but for the financial system. You want to do a transaction that President Trump or the Americans can't see? There's a huge appetite. And, I tell you, it's the, it's not just the Chinese, they don't like all this American control. So the most efficient thing is to have one currency, but not politically, not if America gives America too much power. But I'd also say, on the inside, you know, the internal problems with, particularly our budget deficit, which I know people have been talking about for decades, but interest rates have normalized in my opinion. Long-term real interest rates are probably higher for much, much, much longer. I've been talking about that, and writing about it for a long time in my research. Uh, you know, we had a big drop after the financial crisis happened many times. If you look at centuries, it's high, it's low, until it isn't. I mean, after the Great Depression, it was down around zero for a while also. So that, when you're the world's biggest debtor, that's a problem. And then if we lose some of our exorbitant privilege, which gives us a lower rate than we would pay otherwise, that's so much the worse. I think that was fading, not going away, but clearly got an acceleration under President Trump. 03:36 Speaker B I wonder how you evaluate all of the flows into gold by central banks and how that creates more of a long-term headwind for the dollar right now. 03:51 Kenneth Rogoff Well, absolutely. For central bank reserves, gold has become a big option. The Russians have been doing that for ages. They've been absorbing their whole gold supply. The Chinese are doing it. Everybody's doing it. So, that's, you know, that's not the main event. 04:16 Speaker B Sure. 04:17 Kenneth Rogoff But, in terms of, it's one of the signs of, they're just trying to look to diversify. Now over the long run, gold's not ideal. They'd like to have something more liquid, easily traded. Uh, but I think that'll come in time. 04:32 Speaker A Do you mind breaking down for me, just in layman's terms, why we like to have the world's reserve currency? Like why does that benefit us? And why might we not want to lose that status and that privilege, as you say? 04:43 Kenneth Rogoff So it benefits us in manifold ways. And not to pitch my book, but you kind of have to read it to read about it. But, you know, the obvious ones that I mentioned, you pay an interest rate that's lower than you would otherwise. It's a big market, it's so liquid, you feel safe. That was true when the UK was the dominant currency and now we are. But there are lots of other things. So one thing is we are able to borrow a lot in a crisis. And there will be another crisis. I don't just mean one that Trump causes. I mean a pandemic, uh, cyber war, something. We, progressives complain we don't borrow enough, but we borrow a lot more than anybody else does. And why don't the other countries borrow as much? Because they see their interest rate shoot up. Ours go up, but more gently. Although that has gotten worse as interest rates have gone up. There are more subtle national security things that are a big deal. A lot of modern spying is cyber. Somebody sitting with a laptop in a dark room and, you know, the uh, CIA building, not the James Bond stuff. And a lot of that is uh, what we got from the financial system. Everything flows through the United States because of our dominance, the dollar, our military dominance. So, there, there are many, and there are many things beyond that. So, why might we not like it? Of course, the Trump administration has Steve Moore, who's very smart guy who's the chair, has said no, it's a burden, it's terrible. It makes the dollar high, it de-industrializes us. And, you know, a short answer to and and makes us run deficits. And a short answer to that is we've been the dominant currency for a while. We weren't running deficits in the '60s and '70s and we were still the dominant currency. The UK was the dominant currency when, you know, the 19th century, when the sun never set on the British Empire, and they ran surpluses. Uh, there are, you know, reasons for de-industrialization which have to do with trade. There are many things that affect our, I should say there are many things that affect our exchange rate. But the big point is that our trade deficit is basically how much the country saves versus how much we invest. Invest meaning real investment, plants and equipment, etc. Well, a lot of things affect that besides the exchange rate. One of them, what do you know, is the government budget deficit, which right now is higher than our trade deficit. So if I really cared about stability and this trade deficit, how about closing up the government budget deficit? 08:28 Speaker B At a House meeting committee hearing Tuesday, we know Treasury Secretary, Steven Mnuchin was asked about the X-date here, the date where the U.S. government will reach its borrowing limit. I want to play a clip for you of what he said and get your reaction on the other side. 08:57 Steven Mnuchin As an outfielder running for a fly ball, uh we are on the warning track. And, of course, the United States government will never default. That we will raise the debt ceiling and Treasury will not use the, any gimmicks. Uh, we will make sure that the debt ceiling is raised. 09:41 Speaker B And so what, what is an appropriate level for the debt ceiling to be raised to? And, and how sustainable is the just continuous raising of the ceiling in order to accomplish what spending targets are also being put forward as well? 10:01 Kenneth Rogoff I mean, I think it'd be fine if we got rid of the debt ceiling. That's not really our problem. The Treasury Secretary is right, we're always gonna raise it. The debt ceiling is sort of, I have a credit card bill, but I don't know if I want to pay it even though I have a lot of money. Uh, no the sustainability of the debt has more to do with, most of all, that interest rates have gone up. So, back for a long time, it seemed like there was no, you know, bill to pay, you just kept borrowing and re-borrowing. You didn't even pay the interest. But now, the interest bill, if you've noticed, has doubled, on its way to tripling. It's gonna be more than, it is more than the defense budget, on its way to a trillion dollars. And that's when you, it gets less easy to borrow another 30% of GDP if there's a pandemic, uh, to pay for something. Uh, there there are, there's a cost. You would rather have lower debt. I mean, there's nothing easy to do about it. But, uh, no, the debt ceiling's sort of theater and power grabbing. And maybe there'll be a slip sometime and we'll screw up and actually default. Great for sales of my book, but I don't think it'll ever happen. 11:45 Speaker A Okay. Well, that is at least some good news. I do want to bring us back to some potential bad news. What is your call on a potential recession? 11:56 Kenneth Rogoff So that is, I think it's more than 50/50 to have at least a gentle slowdown. But we're trying to read into the mind of Trump. Because of course, if he really did an about-face on the tariff stuff. And I don't mean the 10%, which is maybe not the greatest idea, but just, you know, the "let's make a deal", "I'm uh Hollywood needs to be protected. Let's have a tariff on that." I was just in the UK, and you probably, maybe reported on this, but he wants them to have free speech. And they're going like, "We gave you free speech. We, we're the home of free speech." And a lot of the things are just, you know, out there. That they're asking for sort of some MAGA wish list. And it's, it's very disconcerting. Now I have to say, a lot of people you probably talk to, you know, big finance people and hedge fund people, and clearly the market thinks, "Uh, he's a pragmatist at heart. He knows he screwed up." I don't know if he knows he screwed up. "He's gonna back off." And they just think it's gonna go away. That, I think if you did a poll, you can try it, of where are we gonna be in a year? They'd all say, "10% tariffs, maybe a little fluff with China, it'll all be over." I'm skeptical of that. And that's why I think the odds of recession are higher. I mean, Trump's still gonna be Trump, uh, for better or for worse. So, I don't see an exit from the chaos. If there's no exit from the chaos, uh, it's hard to see how we don't have at least a mild recession. 13:53 Speaker B Is this a case where we need to see some of these smaller trade deals start to come through first or is there need, there's, does there need to be resolution on one of the larger trade partners out of the gates here to really set the tone? Because some could argue that he already kind of showed his hand. Didn't want the stock market to go into bear market territory. That would have looked bad. And then additionally, you've got all the CEOs showing up at 1600 Pennsylvania Avenue's doorstep, saying, "Hey, we're not going to have stuff on shelves in the summer if you don't step back off of this." 14:30 Kenneth Rogoff No, you are so right. That's what not just the markets thinking, that's what all our trade partners are thinking. They're, why aren't you seeing reports of, you know, sudden deals? Because they don't want, they can't for their own public. By the way, if Xi gave in to Trump and lost face, he'd be done. I mean, he cannot any more than Putin, you know, can surrender. Uh, he can't. So you know, everybody, my conservative friends, and uh, I regard myself as a centrist, but my conservative friends will say, "Ah, this is just the, you know, Art of the Deal, don't pay attention." And I say, "Okay, but when he was a real estate mogul, he was bidding on a hundred things. So he got three of them. Great. He got three good deals, he's making a lot of money." We can't walk away from the other 97 countries, you know, in this case. 15:25 Speaker B Not a great percentage. 15:25 Kenneth Rogoff Yeah, it's not a good percentage when you're President. It was a, it was a great, you know, approach when you're a real estate mogul. So we'll see. If I want to say something that could turn in his favor and make him look amazing in 10 or 15 years, it would be that even though it's all chaotic, and he's not always lasering in, China is our rival. They are down right now. He's hitting them while they're down. And if he didn't, there's gonna be something over Taiwan, there's gonna be a problem somewhere. And so maybe he'll say, "Oh, just a stroke of genius that he took 'em on when they were vulnerable. Xi fell and they got rid of Xi, turned into more." I'm really playing this out. "Had a more democratic government, it all worked." And Trump, although he was so uh, you know, brutal in his approach to trade, he got it done. Anyway, I'm an American, I wish well for our President. I hope that's what we're writing in 10 years. 16:51 Speaker B Dr. Kenneth Rogoff, we really appreciate you coming on and sharing your insights with us today. Thank you. 17:13 Kenneth Rogoff Thank you.
