Paul Blustein

“There is a story, which, we were hearing a good bit more about, lately, that, that the reason the dollar survived that period is because there was a secret agreement between The US and Saudi Arabia. There's a, you know, an entertaining story, which is much loved by, the crypto people, because they like to argue that the dollar is founded on a kind of a, you know, dirty energy consuming basis, that it was a secret, handshake deal between The US and and Saudi Arabia, that, The US would protect the house of Saud, the the ruling family, on the one hand, and the, and the Saudis would promise to price oil in dollars. In the course of researching my book, I I, I I found that it actually is much less to that story than than, is commonly believed.”

“The Japanese took the view. You know what? We're having this great success with the system as it is, and we don't wanna change it. They didn't want the yen to be, to be internationalized. They had strict controls over how much of it could could could go abroad. Anyway, they did finally, give in to American pressure and saw it as being more of an advantage to, to open up. But by the time the Japanese did open up their financial market, was, the the the mid nineties, and then the bubble the bubble had burst, and, everyone was, you know, the hopes for Tokyo to become the world financial capital were dimming, you know, week by week.”

“The Chinese, have for for for a number of reasons, but but I would say primarily because China, the Chinese Communist Party does not want, to, give up its control over the flows of money across its borders. There are financial reasons for that. There are also political reasons for that. They, you know, they worry that, that, you know, that rich people will take their money out, because of, you know, because they don't like the regime. The other another very important factor is is the the the communist party's control over courts. That means that, you know, foreign investors have to worry that, if they have a dispute over their assets that are held in China in renminbi form, that the courts will rule against them.”

“When I when I was starting the book, there was oh, I was almost hysteria about the e c n y, about the Chinese central bank digital currency. They had lotteries. And if you you won, you would get a, you know, you would get a that you directly to your phone, you would get, you know, 200 you, yuan worth, for free to spend. Oh, once China has, you know, has launched this on a worldwide basis, just imagine, you know, everyone will be will be using it. And, you know, people in Kansas and Iowa and Idaho, I don't know, they'll have this in their phones and their and their personal information will be beamed back to Beijing. Even in China, the e c n y, people wanna use WeChat and and Alipay. The the ECNY has is is, you know, just hasn't caught on.”

“The crypto industry, has latched onto this as as one really great use case for this kind of, monetary transmission. And the and most stable coins are in I mean, there are some that are in other currencies, but almost, I think, 98, 99% are are are backed by dollars. I don't think it'll hurt the dominance of the dollar, but I'm very skeptical that it'll help much. There's a great irony here, of course, because the crypto a whole technology was started as a as a revolutionary. The idea was it was, you know, going to completely circumvent the governments and, and the dollar and the fed, and it's kind of hilarious to me that that they're now because it's, you know, in their financial interest to do so, promoting, stablecoins as, as as wonderful for US national security.”

“I think that probably the worst aspect of this is is the attacks on the independence of the Federal Reserve because if, obviously, if the Federal Reserve is gonna be pressured into just, you know, printing whole bunches of money to to to in an effort to bring interest rates down, which is what Trump has been pushing for. Well, why would people wanna hold dollar assets? They have to worry that the value of those will, you know, will be will decline over time because of the purchasing power of the dollar being eroded. So, and then, you know, there's also the passage of the so called one big beautiful bill, which, you know, worsened the already quite grim outlook for American, budget deficits and debt.”

“In the book, I have a kind of a central thesis, which is, that the dollar's dominance is all but impregnable barring catastrophic missteps by policy missteps by the US government. I still think that the basic thesis is right. Sure. Catastrophic missteps could could, you know, lead to the dollar losing its dominance, but I think they have to be even more catastrophic than what we've seen because the dollar's dominance, remains as strong as it is for for a whole bunch of fundamental reasons, but one of which is the lack of of of alternatives, any other currency to replace it for for use in international transactions.”

“The other thing I would look for, and these are this would be a very awful scenario if there's a war between US and China over Taiwan. Well, then the world would probably split into two blocks, one dominated by the dollar, the other dominated by the renminbi. That would be awful, and the dollar would not be as dominant as before globally. But, that would be the least of our worries, wouldn't it?”