Time will tell, but....
"...the euro is the greatest fiat monetary success in the post-Bretton Woods era; let us not deprive it of its merit." It affected us, and our Deutschmarks -- as a value related to the USD -- when converted automatically to the Euro, dropped in purchasing power rather quickly. So "success" is a word with different meaning to different people.
And it seems muddled to conclude, "The end of the U.S. dollar, if it comes, will not arrive through competition from another fiat currency, as the temptation of governments to destroy the purchasing power of the issued currency is too strong. It will probably come from independent currencies."
There will be NO "end of the U.S. dollar" as the phrase goes. There will likely come an end to the SWIFT system as the unipolar money transfer system, as competition is created and trade handled between non-US nations in other non-US currencies. Ditto for the Euro.
There will be a dollar, and likely a Euro unless the EU breaks apart and ECB debt challenged. But trade conducted in other currencies is the issue and likely coming reality.
Oddly, that is what I personally experienced decades ago, when I was paid in Pounds sterling, French and Belgian and Swiss francs, Guilders, Deutschmarks and more. I "traded" in multiple currencies. And sometimes brought currency between countries without the services of bank transfers. It should not be too far fetched to imagine the "past" being made "new" again.
With competition to the SWIFT system and BIC, the question is one simply of "economic sanctions" no longer being what these last very few decades have become -- weapons.
Good point, but even SWIFT isn’t that important. The main source of the dollars power is that any currency other than the USD comes with a certain risk premium.
If you are a corporation that sells around the world, you don’t want to hang on to rupees, reals, or rubles.
If you have a billion in reals sitting on your books you either
1) accept the risk that they could drop by 10% next month
2) Pay $50 million a month for a currency hedge to cover that danger
3) Dump them for USD or Euros as soon as you can
Almost every corporation chooses option 3, and there isn’t much that could change that.
For a currency to be a world currency there has to be enough of it. Originally, I thought the various BRICS countries would trade their own currencies for one backed by gold that they bought. But there seems to be no way to operationalize such a scheme. Who would supply the gold and at what price? Who would hold onto the gold and at what cost? Then there’s the politics. China wants the power that controlling BRICS would give them. India will fight that to the death. Russia is looking for a way to use BRICS in their war and nobody else in BRICS, including China, wants the knock-on effect of sanctions they’d get from the rest of the world for dealing with Russia. What comes to mind is two drunks helping each other cross the road. The weaker economies like Iran, Brazil and others, are simply looking for a free ride. This is a pointless diplomatic exercise.
Yes. Excellent comments. A "fragmented" (ie. nationalist) global monetary system is the historical norm, so indeed - why wouldn't history naturally trend back in that direction? Especially given that the global conditions that first created the Bretton Woods system after the devastation of WWII have disappeared, and the subsequent 30 years of American unipolarity and economic hegemony is disappearing quickly also.
My question is: what about gold? Imagine any small "3rd world" country trying to achieve stability and economic growth. For them earning, protecting, holding FX reserves in USD is really no different from having to earn and hold gold. Neither is a currency they control. Certainly the network-effects and ease for borrowing, and paying, in USD is more convenient.
But what if an interbank/international settlement system for settling in gold existed?