The U.S. dollar will play a much less dominant role than it is today within the next ten years due to a smaller share of the U.S. economy in the world,
The share of the United States in the world economy will be less and the role of the U.S. dollar will naturally diminish, because other currency settlements will take a hold, said Jeffrey Sachs, an economics professor and director of the Center for Sustainable Development at Columbia University at the 15th Annual Columbia China Summit.
Speaking at an online session of the meeting, Sachs noted that the international payment system now is based on U.S. dollar, with 50 percent to 60 percent of international trade settlements based on U.S. dollar or denominated in U.S. dollar, and about half of international reserves based on U.S. dollar.
The U.S. share of the world economy in purchasing terms is around 15 percent, so the role of the U.S. dollar is far larger than the role of the U.S. economy and the role of the U.S. dollar is a kind of historical role, said Sachs.
The role of the U.S. dollar reflects the power of the United States, especially in the 20th century, added Sachs.
As the U.S. dollar became a political weapon by the United States in confiscating foreign exchange reserves of Russia, Venezuela and Iran, lots of countries don't want to keep their money in dollars anymore, said Sachs.
This is because "they don't trust the United States and they think the United States is going to confiscate their currency, especially if they get in some kind of foreign policy disagreement with the United States," Sachs said.
Moreover, the role of the U.S. dollar is based to a significant extent on the U.S.-dollar-based commercial banking system as the payments are largely settled through commercial banks.
In the future, payments are going to be settled digitally through central bank digital currencies, said Sachs.
Digital renminbi, which is an experiment now at the retail level within China, will end up being an international payments system settlement, Sachs said.
Over the past month, Russia, China, Saudi Arabia, India and South Africa are all looking for alternative payments, because they don't want to use the U.S. dollar banking system and it's understandable, he said.
The role of the U.S. dollar will diminish and the role of the renminbi, the rupee, the ruble and other currencies will rise in the future, said Sachs.
