Why Hasn't The Dollar Fallen? | Lessons from Currency Historian Barry Eichengreen

Key Takeaways

• Dollar dominance persists thanks to deep, liquid U.S. markets and network effects, but internal pressures—rising debt, chronic deficits, political erosion—could cause gradual erosion or a sudden flight.
• International-currency prerequisites: fiscal prudence, deep markets, rule of law, liquidity, alliances, and security — proven by the solidus and Spanish pieces-of-eight examples.
• No easy global substitute: Bancor/SDRs need global governance; renminbi constrained by political control; gold remains a credible reserve flight option; Bitcoin too volatile for broad reserve use.
• Blockchain and tokenization are the consequential innovations: CBDCs, tokenized deposits, and tokenized gold could rewrite payment rails and reshape reserve asset flows.
• If foreign holders rapidly sell Treasuries, interest rates and borrowing costs would spike, capital would flee, and markets could crash — policy can delay but not guarantee avoidance.
• Investor guidance: diversify across assets, study monetary history, expect disruptive shifts in currency dominance, and treat crypto as a high-risk frontier rather than a proven safe haven.

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