Wall Street pundits and investors are schizophrenic about the dollar. The dollar weakened after Moody’s cut the US credit rating by one notch from Aaa (the highest rating — to Aa1, attributing the downgrade to the increasing fiscal deficit, as well as the rising interest rate costs on Federal government debt. On the other hand, the S&P500 not only recovered after the April Trump tariff shock, but is now only 3.4 per cent off its record high last February.

Nevertheless, the 30-year US Treasuries yield exceeded 5.0 per cent per annum, indicating investors’ nervousness about US deficits and debt sustainability. Whilst leading Financial Times columnist Martin Wolf worries about Trump’s Assault on the Dollar, he and most economists agree that there is no suitable alternative to the dollar. I beg to disagree. Wolf listed five possible alternatives: first, either Renminbi or Euro may replace the dollar; second, a two or three reserve currency world; third, the dollar status quo; fourth, a global currency like Special Drawing Rights (SDRs); or fifth, a crypto-currency world.

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I agree that fiat currencies are not serious alternatives to the dollar, since the Euro is a weak second, whilst the Yen and renminbi are not even close contenders. A global currency like the SDR is a pipe-dream, as rival powers cannot agree on a global central bank, whilst the US has de facto veto on any IMF reforms that would allow the expansion of the role of the SDR. Finally, even though crypto-currencies have reached $1.5 trillion in market value and Bitcoin rose above $100,000 after the tariff shock, most people would not be able to access cyber-currencies if during a world war, all internet........

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