Great power conflict puts the dollar’s exorbitant privilege under threat

Since the end of the cold war, the world has largely enjoyed a unipolar era – the US was the undisputed hegemon, globalisation was the economic order and the dollar was the currency of choice. But today, geopolitics once again poses a formidable set of challenges to the existing world order. That means investors have to discount new risks.

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If less trade is invoiced in US dollars and there is a dwindling recycling of dollar surpluses into traditional reserve assets such as Treasuries, the «exorbitant privilege» that the dollar holds as the international reserve currency could be under assault.
If less trade is invoiced in US dollars and there is a dwindling recycling of dollar surpluses into traditional reserve assets such as Treasuries, the «exorbitant privilege» that the dollar holds as the international reserve currency could be under assault. (Foto: Bloomberg Creative Photos/Bloomberg)