Currency regimes through history - 100 years of dominance is about right

With all the talk about dedollarization, it is important to look at the history of past dominance of global reserves currencies. Generally, the dominance has lasted about 100 years and coincide with the dominance of an empire or country hegemony.  The end of a currency as a global reserve matches closely the loss of a war that bankrupts the reserve currency country. It certainly is not surprising to hear the talk about a dollar decline given the decline in US dominance as a world leader. The US is still dominant but there is a growing degree of polarization and country grouping. Of course, there has always been polarization. The Cold War formed a bipolar world between East and West with the Third World somewhere in the middle, but there was no competition to US and Western economic dominance. 

Of course, a country decline is not always abrupt. There is a period of transition, and it is during the transition period that long-term trends will emerge; nevertheless, these long-term trends are unlikely to lead to short-term profits. A long dollar decline will still see periods of dollar gains. 

The biggest impediment to a dollar decline is not from anything the US can or will do. The dollar is dominant by default. China runs large trade surpluses and is net saver, and it is unwilling to be convertible will all other countries. The RMB may be used for trade financing and payments, but that is not the same as serving as a store of value.

 

From Uncommon Cents