Money and business

The domination of the dollar as a backup currency until now

The dollar is achieving great returns against the most important, most reliable and exchanged foreign currency basket, but its future role as a global backup currency is still a question due to financial fragmentation and concerns about global debt, and analysts say that the domination of the dollar as a backup currency is not threatened until now, but things may change in the future, according to what I mentioned The “World Economic Form” platform.

Questions about the domination of the dollar

Borrowing trends in the United States and the challenges imposed by other traditional and digital currencies and the burden of debt in dollars on developing countries are all questions about the constant domination of the dollar.
Also read: Why is gold a good safe haven yet despite its high prices?
A committee of experts that participated in the annual meeting of the 2025 World Economic Forum in Davos would expect that the dominance of the dollar in the foreseeable future, but the gradual diversification may require greater global cooperation in the coming years.

What economists expect?

While many economists expect that the US dollar will remain the basic backup currency in the coming years, there are questions about whether the American borrowing market is sustainable and how other currencies may challenge the dollar according to a basic definition of the extent of the elasticity of the dollar -based system in responding to economic and geopolitical shocks And climate.

The costly concession for the US dollar

Economists raised questions about the financial path of the United States.
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According to this framework, “both parties in the United States appear to believe that American religion is a huge dilemma,” the economist Kenneth Rojov of Harvard University, noting that interest installments on the federal debt now exceed the entire US defense budget.
Meanwhile, the dollar remains at high levels approaching standard levels compared to other currencies, which have not been broken since 1985 and 2002.
In the previous two cases, Rojov noted that the value of the currency decreased dramatically within a year or two.

A pioneering and dominant currency

Until now, the United States has given priority for its leading currency in the world and keeping it despite the high cost.
“This dollar concession is partially dependent on investor investors’ desire to maintain American assets,” said Rajuram Rajan, the former governor of the Indian Central Bank, who is now a professor of financing at Bath College for Business Administration at Chicago University.
Rajan added: “If you ask: Where do you put your money in safe assets? It is almost certain that the answer is the United States.”
However, Rajan warned: “Anything that continues without any restrictions must eventually stop.”

Diversification options

In this context, there is a hypothesis that the dollar’s displacement in a dramatic way may include in one of the future tracks the gradual diversification of the two countries for the values ​​of their preserved and treasury by creating new financial ties and infrastructure.
Economist Jane Kyo, a professor at the Business College at the University of Hong Kong Science and Technology, indicated that China has created about 40 binary currency exchanges with developing countries.
Kyu explained that these efforts are part of a long -term strategy to reduce dependence on the dollar.
“The share of China from the trade that is pushed in Renminbi from 20% a decade ago to 56% today,” Jin said, stressing the rapid pace of change. Jin explained that while the American Federal Reserve maintains credit exchange lines with many advanced economies, the existing system often does not serve developing countries.

World financial liquidity

Experts said that the Federal Reserve has become increasingly liquid in the world in times of crisis.
The increasing dual role played by the Federal Reserve as the US Central Bank and the actual lender as a haven for most countries of the world impose challenges on formulating monetary policy.
While cryptocurrencies and digital payment systems may provide advantages for some transactions and markets, a few economists see that special forms of money such as bitcoin may replace the dollar or other currencies in the near or medium term.

Transformation from the dollar for other currencies

Diversification in currencies is not merely the issue of shift from the dollar to the euro or the yuan, for example, but this requires strengthening ties between banks and clearing centers and other institutional transformations that may take years if not contracts.
Analysts believe that the gradual shift from the dominance of the US dollar may be better than sudden transformations because sudden changes in the financial structure or fragmentation of the financial system bears severe risks.

The risk of the global financial system is divided

An economic analysis of the World Economic Forum is expected that the severe fragmentation of the financial system may lead to a decrease in global GDP by 5%, which exceeds the setbacks caused by the financial crisis in 2008.
The challenge that many countries face lies in the fact that the constant prediction of the dominance of the dollar or its decline is also lies in managing the transformation into a more multi -poles financial system in the form of a system that maintains global stability and serves the developing world better.

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