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Eichengreen warns US dollar crisis risk could exceed 50%

An economic historian said US policy volatility and weak institutional guard rails could raise the probability of an abrupt dollar confidence crisis to more than 50 per cent over the next decade.

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A prominent economic historian warned that the risk of an abrupt crisis of confidence in the US dollar could rise above 50 per cent if erratic US policies and weak institutional guard rails persist for another decade, according to the SCMP Economy.

Barry Eichengreen, a former senior policy adviser at the International Monetary Fund and now a professor at the University of California, Berkeley, said concerns about the dollar-centric monetary system are growing, but coordination efforts like those used under the Plaza Accord era are unlikely.

Eichengreen argued that central banks are now more focused on domestic objectives such as price stability and employment, with differing views on what constitutes appropriate policy, leaving limited scope for large-scale exchange-rate coordination.

He added that while he favors a more multipolar international monetary system that better matches today’s multipolar global economy, any transition would be far harder to coordinate than in the past, the outlet said.

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