Why the dollar dominates

Is the US dollar about to lose its special dominant role in the world financial system? People have been asking that question for my entire professional career. Seriously: I published my first paper on the subject in 1980.

A lot has changed in the world since I wrote that paper — notably, the creation of the euro and the rise of China. Yet the answer remains the same: probably not. For different reasons — political fragmentation in Europe, autocratic caprice in China — neither the euro nor the yuan is a plausible alternative to the dollar.

Also, even if the dollar’s dominance erodes, it won’t matter very much.