Nouriel Roubini believes the Chinese renminbi could replace the dollar as new technologies such as central bank digital currencies (CBDCs) and corporate payment rails help create a new landscape.
China’s yuan will end US dollar dominance and create a bipolar currency system in the next decade, says ‘Dr. Doom’ Nouriel Roubini https://t.co/jJcPBewixU
Nouriel Roubini (@Nouriel) February 7, 2023
Nouriel Roubini predicts the fall of the greenback
Nouriel Roubini, an economist known for the accuracy of his predictions about the 2008 housing crisis, has warned of the rise of a “bipolar monetary regime” preceded by the demise of the U.S. dollar as a global currency. The Iranian-American economist, called “Dr. Doom” by some because of his pessimistic predictions, alerted readers in an article to the substitution of the US dollar by the Chinese renminbi due to a series of actions that the Chinese government has carried out since the Covid blockades.
Nouriel Roubini states:
Given the increased weaponization of the dollar for national security purposes and the growing geopolitical rivalry between the West and revisionist powers such as China, Russia, Iran and North Korea, some argue that de-dollarization will accelerate.
Nouriel Roubini cites the U.S. government’s growing set of restrictions on its rivals’ use of the dollar, including primary and secondary financial sanctions, as possible reasons for the emergence of this bipolar system over the next decade.
Aggravating factors and de-dollarization efforts
Nouriel Roubini also asserts that the pseudo-adoption of the dollar by the economies of less developed countries leads to disadvantages related to the national management of monetary policy. These countries are thus at a disadvantage, as they do not have a say in decisions on monetary issuance and control. Nouriel Roubini states:
The current system makes emerging market economies financially and economically vulnerable to changes in US monetary policy driven by domestic factors such as inflation.
The economist also mentioned that Saudi Arabia has already settled transactions using the Chinese renminbi, and that this could encourage other countries in the region to follow suit.
There have already been several plans to replace the dollar for international settlements. In July, the BRICS bloc revealed that it was working to create its own currency, in an effort to dethrone the influence of the United States and the International Monetary Fund on their economies. In January, the presidents of Argentina and Brazil announced they were beginning work on a common currency that would serve as a payment instrument between the Mercosur and BRICS countries.
The launch of central bank digital currencies (CBDCs) and the increasing use of private payment rails, such as Wechat in China, will also contribute to this shift, according to Nouriel Roubini.