Nobel Prize-winning economist Paul Krugman says that no currency can play the part of the U.S. dollar. Commenting on the de-dollarization trend and the possible U.S. default, he emphasized that without the USD, “ financial markets will be disrupted by the absence of any secure, liquid asset. ”

Economist Paul Krugman on De-Dollarization and USD Alternatives

Paul Krugman, who won the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 2008 for his analysis of trade patterns and position of economic activity, participated his opinion Sunday about a possible U.S. default and the U.S. dollar misplacing its status as the world’s reserve currency.

He explained in a tweet:

The risk from a debt default is *not* that some other currency will take over the key role now played by dollar securities. It is that *no* currency will be available to play that role — that financial markets will be disrupted by the lack of any safe, liquid asset.

Krugman isn't bothered about the U.S. dollar misplacing its world’s reserve currency status. In an opinion piece issued by the New York Times ahead of this month, he argued that the USD’s dominance isn't in danger. He believes that “ reports of the dollar’s coming demise are similarly probably greatly exaggerated. ” The economist further asserted that the Chinese yuan “ isn’t a viable dollar rivel ” due to the Chinese government’s capital controls.

The Nobel Prize-winning economist opined “ Even if some governments express a desire to see payments conducted in different currencies, it’s not at all clear they can make that happen, since we’re mostly speaking about private-sector decisions. And even if they can make partial de-dollarization stick, all the different advantages of the dollar as a banking and borrowing currency will remain. ”

Some people differed with Krugman’s assessment regarding the U.S. dollar. Economist Michael Hudson called Krugman’s New York Times article “ deliberate ignorance. ” He stressed “ You have to really have tunnel vision and not understand the most introductory economic history to make the misrepresentations that Krugman spoke. ” He clarified “ The trick that Krugman uses, and he’s being deliberately deceptive here, he talks about the current account deficit. The current account isn't the balance of payments Krugman deliberately leaves out the fact that America makes an enormous quantum of money on capital accounts. ”

Regarding worldwide de-dollarization efforts, Hudson spoke “ Krugman is saying that different people have no reason at all for what they’re doing. And when they shift out of the dollar, there’s no reason for them to do it. ”

A rising number of nations are transitioning away from the U.S. dollar and opting to use their respective national currencies rather. newly, 10 Southeast Asian nations agreed to encourage the usage of public currencies to degrade their dependence on the U.S. dollar and Western payment systems. The BRICS countries (Brazil, Russia, India, China, and South Africa) have similarly been pushing for de-dollarization. The economic group is working on a common currency, which is expected to be discussed by the BRICS leaders at their forthcoming summit.

(Kevin Helms, Bitcoin.com, 2023)