James Saft is a Reuters columnist. The opinions expressed are his own.
HUNTSVILLE, Ala. — While the U.S. will fight it kicking and screaming, the dollar’s upcoming fall from its central global role will be a blessing all round.
The World Bank on Tuesday predicted that the dollar will lose its place by 2025 as the principle global reserve currency, to be supplanted by a multipolar world where it, the euro and the yuan will share top billing.
First off, things have come to a sorry pass when the dollar is going to lose out to two currencies of which one, the euro, many people worry may cease to exist, and the other, the yuan, isn’t even properly convertible.
But beneath the ignominy lies a simple truth: being the world’s main reserve currency is a bit like being a pop star; there are lots of fringe benefits but it is very easy to end up in financial rehab.
There are several supposed central benefits to being the world’s principal reserve currency; lower funding costs, a home-field advantage in financial intermediation and better control over one’s own monetary policy. All three have been a mixed blessing, at best, for the U.S. and may yet turn out to be mostly malign.