Is the dollar’s dominance under threat?

IS THE US dollar at risk of losing its position of international dominance? I’ve been seeing some breathless speculation to that effect over the past few weeks; I’ll talk about the sources of that speculation in a minute. But let me first note that this isn’t a new question. Indeed, I wrote about it at length a few years back.

And by a few years, I mean four decades. I published a paper titled The International Role of the Dollar: Theory and Prospect in 1984, in which I concluded that an end to dollar dominance was possible but not probable and that it wouldn’t make much difference even if it did happen.

Obviously, the world has changed immensely since I wrote that paper, and there have also been some important advances in the theory of international currencies. But both the logic behind the dollar’s (continued) dominance and the reasons not to make a big deal out of that dominance remain pretty much what they were all those years ago.