Agvan Mikaelyan, Member of the Board of Directors of FinExpertiza audit and consulting network, has discussed the U.S. dollar’s prospects in an interview with Invest Foresight. He spoke of the possibility of the dollar’s weakening as the world’s reserve currency in the foreseeable future and considered other strong currencies that can compete with the dollar on the global foreign exchange market.
— So, is the dollar showing signs of losing its status as the world’s reserve currency?
— The dollar’s status as the world’s reserve currency is in jeopardy today indeed; this much is obvious. But I can’t say with certainty that this is an underlying trend today.
— What are the signs of the dollar’s weakening then?
— So far, all we see is the U.S. dollar’s fluctuations against other world currencies. It is indeed shifting up and down, but I want to emphasize that it isn’t a collapse or a meltdown. Still, this trend is noticeably increasing.
— The dollar has always been used as a safe haven during financial cataclysms. Is it still properly secured or not?
— I must say that the dollar has never been secured in the proper sense of the word. Ever since America abandoned the gold standard half a century ago, on August 15, 1971, when U.S. President Richard Nixon abolished the gold standard and severed any ties to the precious metal quotations, the United States has been continuously expanding the gap between the dollars in circulation and physical assets. But America has been a symbol, a true icon of business, of capitalism, and that made it one of the synonyms of trust in this regard.
— Are you saying this trust is running out?
— This trust is fluctuating. The U.S. economy has come dangerously close to stagnation; it is struggling with high inflation and high interest rates. And given the debt load that the United States now has, a key rate of 2-3% is a huge burden.
All this taken together has drastically shaken the dollar’s credibility. Although it’s clear that it won’t collapse overnight, this much is still obvious. American projects in the external market are failing one after another; its overinflated bubbles can burst, crushing the global economy, but above all, the American one.
— In these circumstances, does the world need other reserve currencies in addition to the U.S. dollar? And why?
— I think that whatever the case, we do need stable currencies or their combinations. Without a stable financial instrument like a world reserve currency, the global economy simply cannot exist.
World finances need a single exchange yardstick. Therefore, while we can see the U.S. dollar weaken, something will take its place eventually. These tendencies are emerging even though they are not yet decisive for the global economy in terms of weight and significance.
— There have been talks about expanding or assigning a new status to other political associations such as BRICS or the SCO. Is it already time to consider a different reserve currency? And if not, when will it be time?
— In my opinion, the currencies of these countries or a common currency could be most realistic candidates to become a new world reserve currency. It may happen soon enough, within the next five to ten years. The world’s biggest reserve currency may change or a new currency may be introduced to the family of reserve currencies, or new multi-currency baskets will emerge.