From Warren Buffett to Paul Krugman, some of Wall Street’s biggest names are shrugging off de-dollarization fears
May 13, 2023, 5:45 PM MYT
- The US’s rivals are trying to unseat the dollar, which dominates global trade and investment flows.
- But some of the biggest names in financial markets think it’s unlikely that they’ll succeed.
- Here’s why Warren Buffett, Goldman Sachs, and others aren’t fretting about the de-dollarization movement.
De-dollarization has become a much-debated topic in financial circles of late, with major names including Elon Musk and Ray Dalio ringing the alarm about threats to the US currency.
But many of America’s top investors and economists aren’t losing sleep over the efforts to erode the dollar‘s dominance of global trade and investment flows.
Some worry that the anti-dollar drive will take hold across the world to chip away at the US currency’s dominance.
“If you weaponize currency enough times, other countries will stop using it,” Musk said last month, in an apparent critique of the US using its currency as a tool for sanctions.
Krugman, Buffett shrug off de-dollarization
But his Tweet earned a quick rebuke from Nobel Prize-winning economist Paul Krugman.
“Tugging on one or two strands of this web isn’t likely to cause it to unravel,” he wrote in a New York Times op-ed. “Even if some governments express a desire to see payments conducted in other currencies, it’s not at all clear they can make that happen.”
“Elon Musk is among those warning that weaponizing the dollar will destroy its reserve currency status, because of course he is,” Krugman added.
Krugman’s jibe seems to speak for many top-level investors and economists, who have tended to dismiss the heightened talk of de-dollarization.
“I see no option for any other currency to be the reserve currency,” Warren Buffett said at Berkshire Hathaway’s annual shareholder meeting last week.
Bank of America and Goldman Sachs strategists have also expressed the same view in recent research notes – that despite Musk’s worrying, no other currency can really compete with the dollar.
“To some degree, these questions arise whenever the dollar depreciates a bit,” Goldman Sachs strategists said in a research note last month, echoing the views expressed by Krugman and Buffett.
“There is a lot of inertia in reserve currency status,” they added. “So far, and likely for a long time to come, attempts at de-dollarization remain contained and constrained.”