Monday, May 29, 2023

In the next 10 years, our U.S. dollar won’t be as important as it is now, according to Jeffrey Sachs – a famous economist. This could happen for different reasons, like Washington using money for political reasons, new digital currencies coming up and America having less of the world’s economy than before.

US Dollar’s Declining Power

Jeffrey Sachs, an economics professor and also the Director of the Center for Sustainable Development at Columbia University, thinks that as America’s role in the world’s economy becomes smaller, the US dollar will become less powerful. People around the world might start using other currencies to make transactions.

At a recent talk, Jeffrey Sachs mentioned that most of the international trade (about 60%) is done using US dollars. Also, around half of all global currency reserves are based on the US dollar too.

The United States’s economy only makes up 15% of the world’s total economy, but the special status of the US dollar is much greater. This is because it reflects how powerful the US was in the 1900s. It is kind of like a part of history.

The U.S. is using its money as a weapon by taking away currency reserves from countries like Russia, Venezuela, and Iran that have disagreements with them. According to Jeffrey Sachs, this has made other nations not trust the U.S. and not want to keep their money in dollars anymore because of the fear of having their funds confiscated if they do something the U.S doesn’t like.

Economist Jeffrey Sachs Predicts a Shift to Digital Currencies for International Payments

The economist said that the U.S. dollar is important right now because payment for things are usually done through commercial banks. But Sachs believes in the future, payments will be made with digital money from central banks (CBDCs).

The Chinese government is currently testing its digital version of the renminbi (called e-CNY) for purchases within the country. An expert named Sachs believes that this digital payment system could eventually be used worldwide for different kinds of cross-border payments.

Russia, China, Saudi Arabia, India, and South Africa don’t want to use the banking system based on U.S. dollars anymore. According to Mr Sachs, it is understandable why that is the case. He predicts that in the future the role of U.S. dollars will decrease while currencies like Renminbi (Chinese currency), Rupee (Indian currency) and Ruble (Russian currency) will grow in importance.

Jeffrey Sachs is famous for his help to governments all over the world, such as Latin America and Eastern Europe, in changing their economies into market-based ones. Two years ago, Sachs said that bitcoin brings nothing good but he also accepted some of its advantages– like faster transactions.

Do you think U.S. economist Jeffrey Sachs guesses right? Let us know what you think about this topic by writing your opinion in the comments section below.

The pictures used here are from Shutterstock, Pixabay, Wiki Commons, and lev radin /


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