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The Future of the Dollar
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The Future of the Dollar

U.S. Financial Power Depends on Washington, Not Beijing

Henry M. Paulson Jr.
Foreign Affairs, 2020
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The US dollar has enjoyed unrivaled pride-of-place as the world’s reserve currency since the end of World War II. In the COVID-19 pandemic’s aftermath, however, the United States must sustain its economic and political strengths to maintain its premier currency position. So says former US Treasury Secretary Hank Paulson in this cogent commentary. He believes that the US dollar’s ongoing status is not a sure thing: America needs to manage its fiscal deficits and debt, along with the public health crisis, in an “open political system” that asserts global leadership.

Summary

The US dollar remains the world’s safe-haven currency for now.

The long-standing choice of the US dollar as the primary international reserve currency carries on in the 21st century. During the 2008 Great Recession and the onset of the COVID-19 pandemic, investors the world over found shelter in the dollar. This top reserve stature is all the more remarkable in light of the ascent of China’s economy and the shrinking share of America’s percentage of global GDP, which fell to 25% in 2020 from almost 40% in 1960.

This international preeminence brings benefits: Interest rates on US dollar assets are lower than they would be otherwise. The dollar’s edge ...

About the Author

Henry M. Paulson, Jr. chairs the Paulson Institute. He served as US Secretary of the Treasury from 2006 to 2009 and was the chairman and CEO of Goldman Sachs from 2000 to 2006.

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