The New CS Board

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The fate of the dollar’s status is in-America’s-hands

Washington, China, and the Rise of the Renminbi: Are the Dollar’s Days as the Global Reserve Currency Numbered?

William T. Wilson, Ph.D. Aug 17, 2015

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By far the greatest threat to the dollar’s reserve status is the U.S. budget deficit and projected federal unfunded liabilities. In surplus as recently as the late 1990s, the U.S. budget deficit currently exceeds 100 percent of GDP. The federal debt has more than tripled since the turn of the millennium. Worse yet, according to the U.S. Debt Clock, the total value of future unfunded liabilities is $96 trillion—$812,000 per person. This does not include state liabilities, and some economists consider the figure to be considerably higher.

If this current scenario persists, it is clear that American debt will fail to hold its value. While it is difficult to predict when this will occur, if sovereign debt fails to hold its value, investors will lose confidence and the dollar will likely lose its global reserve status. But the RMB is not likely to fill the void any time soon.

The fate of the dollar’s status and all it means to American prestige and global leadership is in America’s hands. The RMB is not the threat to the dollar.