Preface
However, the limited financial market development and structure of political and legal institutions in China make it unlikely that the renminbi will become a major reserve asset that other countries turn to for safekeeping of the bulk of their reserve funds.
The renminbi is hardly the only currency with aspirations of playing a more prominent role on the world stage. Chapter 13 reviews the prospects for other currencies, as well as alternatives such as gold and bit-coins, to threaten the dollar. With greater integration of global financial markets and rapid technological advancements, it will become easier to settle cross-border trade and financial transactions in currency pairs that do not include the dollar. The main conclusion from Chapters 12 and 13 is that the dollar is likely to become less important as a medium of exchange for mediating international transactions. But its position as a store of value remains secure for the foreseeable future.
Although this book presents more reasons to be sanguine than concerned about the dollar’s future, the global monetary system is at a fragile equilibrium. Chapter 14 analyzes various tipping point scenarios that could cause the dollar to come tumbling down from its pedestal. A few such scenarios are plausible, but there is no easy escape route from the dollar, as financial turmoil even in its home country will simply drive investors back into its arms.