June 12, 2023
I’ve heard how people are worried about the U.S. dollar losing its status as the world’s reserve currency. They point to changing dynamics, like oil market deals.
I don’t buy it.
There’s long been speculation over the dollar, but it has strengthened itself as the world’s reserve currency over the last decade. Anything suggesting otherwise is unfounded.
According to International Monetary Fund data, the U.S. remains the world’s largest economy by a wide margin. For that reason alone, our dollar should be the world’s reserve currency for the foreseeable future. Also, U.S. gross domestic product (GDP) rose to a record $25.5 trillion in 2022, an increase of 2.1% over 2021.
The largest slices of the global economic pie are held by the U.S., China, Japan, Germany, and India, in that order. Together, these countries account for more than half of global GDP.
It’s true that China’s economy is growing faster than the U.S. and is expected to overtake us in the years ahead. But most forecasters don’t expect this to happen until at least 2035. And who knows what could happen by then.
That means we’re probably going to remain the world’s largest economy for at least another decade, and perhaps even longer. The same can likely be said for the U.S. dollar keeping its place at the top.