text: To recap years worth of reporting in the Economic Early Warning, Bretton Woods in 1944 established the USD as the world reserve. The past 600 years show that the world reserve typically lasts for 80-100 years before being replaced. And 80 years from Bretton Woods is 2024, while 100 years is 2044. My expectation is that the USD has less than 20 years left as the world reserve. To be clear, the USD may not be entirely replaced, but displaced. As we shift back to a multipolar world, we could see a basket of currencies emerge as world reserves. This week, Federal Reserve Chairman Jay Powell warned as much. When asked what impact China and Russia moving off dollar-based trade would have, here’s what Powell had to say:“I don’t think it’s something you would feel right away. Over time, they [China] would have to create an economic ecosystem whereby another currency becomes, you know, a better currency for them [the world] to use.You know, what we can do is we can make the dollar the most attractive currency by continuing to have the rule of law and open capital accounts, and make it an attractive place for people to invest and to use in their businesses. There wouldn’t be any short-term effect of that.Over time, though, you know, I suppose it would diminish our status as the reserve currency. It’s also possible to have more than one large reserve currency, and there’ve been times when that was the case. And so, it’s not really clear.”In this week’s testimony, Powell was also asked about the viability of a China-backed SWIFT alternative. “I mean, that’s an interesting question to speculate about. I think in the near term, that’s not something you can create overnight. I know that China does have their system. It’s really a question for the longer term and not for the immediate. It’s not something you could do quickly like that, but we think about that.” Powell was also asked about cryptocurrency – specifically “stablecoins,” which are digital tokens pegged to the USD. When asked if stablecoins can play a role in USD competition with China, Powell said, “[T]here may well be a role for well-regulated stablecoins. I think there’s the possibility over time, and this is not what we see right now, that they could be efficient and popular among consumers and things like that. I think in terms of helping us compete with China, I don’t know.” For the past couple years, the Fed has teased the possibility of a Fed-backed Central Bank Digital Currency, which would compete with the Digital Yuan. A Fed-backed digital currency, or even the use of stablecoins, would expand the availability of dollar-denominated trade, which would increase foreign demand for the USD. It’s still very common for shops in foreign countries to accept USD as payment, and it’s often preferred to their home currency. Furthermore, it’s also common for foreign banks to issue loans denominated in dollars. Foreign banks do this so that they get paid back in USD, as opposed to currencies that are being devalued. And doing this digitally will be much easier than transacting electronically or in cash.Conclusion