Yuan versus dollar: Which currency for global economic stability?

The question of the decline of the dollar is still being talked about. Some analysts had challenged the idea a few weeks ago. In the aftermath, a politician like Hillary Clinton had cried conspiracy. This time, it is the economist Paul Krugman who decides on the subject.

If the dollar falls, global financial markets would be in dire straits

Paul Krugman, the American Nobel laureate in economics, spoke about the announced end of the dollar. For the past few weeks, this prospect has been agitating and dividing analysts as their opinions on the subject are divided.

Moreover, it is not certain that Krugman’s opinion tip the balance. But, on the whole, this last part of the premise that it is not possible that the dollar collapses. According to a comment he posted on Tweeter, such a prospect would carry too much risk.

If for the United States, they increase the possibility of a default on the debt, these threats would be more pernicious on a global scale. According to Krugman, a collapse or replacement of the American currency would profoundly upset the balance of global financial markets.

According to the American economist, the dollar would be the only currency capable, at present, of ensuring this stability. In other words, the potential end of the dollar would mean an upheaval in the financial markets for lack of economically viable money.

For Krugman, the Chinese yuan, which aspires so much to dethrone the American dollar, does not have such a characteristic. From this point of view, he believes that “Reports of the upcoming demise of the dollar are probably greatly exaggerated”. Chinese currency “not being a viable rival of the dollar”, due to capital controls imposed by the authorities.

Still in denial?

Obviously, the opinion of Paul Krugman did not fail to react to some of his peers. This is the case of the economist Michael Hudson, who seems offended by what he describes as“deliberate ignorance”. Because according to him, “you really have to be narrow-minded and not understand the most basic economic history to make the misleading statements that Krugman made.”

“The trick used by Krugman, which is deliberately misleading, is to talk about the current account deficit. The current account is not the balance of payments. Krugman deliberately leaves out the fact that America is making huge amounts of money on the capital account”. As can be seen, the question of the announced end of the dollar is eminently divisive.

Receive a digest of news in the world of cryptocurrencies by subscribing to our new service of newsletter daily and weekly so you don’t miss any of the essential Tremplin.io!

Similar Posts