{
  "title": "The Dollar Game",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2025/12/cafe-economics-the-dollar-game-bruce-edwards",
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  "summary": "Chess grandmaster-turned-economist Kenneth Rogoff talks about the moves that made the dollar king and those that could topple it",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Interview with Kenneth Rogoff, chess grandmaster-turned-economist, on the rise and potential decline of the US dollar as the dominant reserve currency.\n- Rogoff’s book: Our Dollar, Your Problem, examines the rise of the US dollar and what might cause it to fall.\n- Interview edited for length and clarity; full interview available as podcast."
    },
    {
      "heading": "Historical drivers of dollar dominance",
      "content": "- World War I and World War II:\n  - World War I crippled Britain’s economy; sterling was codominant with the dollar.\n  - After World War II, the US, with perhaps 40 percent of global GDP, became the primary economic power and the only “game in town.”\n- Postwar monetary arrangements:\n  - Currencies were pegged to the dollar; the US had to trade dollars for gold whenever official creditors asked.\n  - 1971: President Richard Nixon ended dollar convertibility to gold.\n  - 1971 anecdote: US Treasury Secretary John B. Connally reportedly said, “Well, it’s our dollar. That’s your problem.”"
    },
    {
      "heading": "Why the dollar remains strong—and vulnerabilities",
      "content": "- Institutional setting:\n  - Central bank independence has been a major policy innovation of the past 70 years; Rogoff argues it’s under pressure and critical to financial stability.\n  - Rogoff worries central bank independence is “under assault everywhere,” with unique pressures in the US.\n- Competitors and market dynamics:\n  - Competitors at the margin include the euro, crypto, and the renminbi.\n  - China’s long-running peg of the renminbi to the dollar enlarged the dollar’s footprint in Asia.\n  - Today, “Asia is half the dollar bloc.” Rogoff suggests it might have been “more like a quarter or a third” if China had not pegged to the dollar for so long.\n- Market-share vs. ranking:\n  - The dollar could “keep its number one position but lose market share.”\n  - If investors find the dollar less desirable and to absorb supply demand higher interest rates."
    },
    {
      "heading": "Debt, interest rates, and risks to dollar status",
      "content": "- Rising interest-rate environment:\n  - Rogoff believes long-term interest rates are going to stay high “for a very long time, at least on average.”\n  - Historical reference: the period of near-zero interest rates led many economists to believe advanced economies no longer needed to worry about debt.\n- Fiscal consequences:\n  - US interest payments have “nearly tripled relative to GDP in a short period.”\n  - US interest payments are “bigger than defense expenditure.”\n  - Personal finance illustration: “it’s brutal if your 2 percent mortgage suddenly jumps to 7 percent.”\n- Policy complacency and political constraints:\n  - Rogoff sees “very little political will” to adjust fiscal policy despite the increase in debt service.\n  - He warns that persuading Congress and the American people to rein in deficits may be difficult “until the economy reaches a cliff edge.”\n- Scenario risks cited:\n  - If interest rates remain high, debt service burdens will rise.\n  - If long-term rates fall again or AI delivers politically sustainable growth, pressures could ease.\n  - Conversely, sustained high rates or sudden needs (e.g., “a war” or military buildup) could produce trouble for dollar demand."
    },
    {
      "heading": "Past episodes of challenge to dollar dominance",
      "content": "- The yen and Japan:\n  - There was a period when Japan’s economy appeared to be overtaking the US, with stock market and real estate values very high, but subsequent policy and financial crises undercut that challenge.\n- China:\n  - Early 2000s IMF advice: China should not peg exchange rates and should deploy independent monetary policy to avoid distortions (e.g., rapid house-price inflation).\n  - Had China not maintained a fixed exchange rate for a long time, the dollar’s footprint would likely be smaller."
    },
    {
      "heading": "Policy implications and recommendations (implicit in interview)",
      "content": "- Preserve central bank independence to maintain credible monetary policy and control inflation.\n- Address rising debt and deficits to avoid forcing investors to demand higher interest rates to absorb supply.\n- Reassess the political and fiscal response to higher long-term interest rates to prevent debt service from crowding out other priorities.\n- Consider the international implications of domestic monetary and fiscal choices, given the dollar’s central role."
    },
    {
      "heading": "Key statistics and exact figures from the interview",
      "content": "- 1969: Rogoff’s first exposure to non-dollar-dominated world (Yugoslavia trip).\n- 1971: Nixon ended dollar convertibility to gold.\n- 2001–03: Kenneth Rogoff served as IMF chief economist.\n- 1982: Rogoff’s first visit to the IMF and wrote on central bank independence.\n- early 2000s: Period when IMF advised China to abandon the peg.\n- “perhaps 40 percent of global GDP”: US share after World War II (as described by Rogoff).\n- “Asia is half the dollar bloc”: current composition of the dollar bloc (Rogoff’s statement).\n- “more like a quarter or a third”: hypothetical size of Asia’s share of the dollar bloc absent China’s peg.\n- “2 percent mortgage suddenly jumps to 7 percent”: example of borrower pain from rising rates.\n- Interest payments have “nearly tripled relative to GDP in a short period.”\n- Interest payments are “bigger than defense expenditure.”\n\nSource: The Dollar Game — Interview with Kenneth Rogoff, F&D Magazine (IMF).\n\n---\n\n Content in this bundle\n\n- The Dollar Game\n  - The Dollar Game (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Dollar Game (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2025/12/cafe-economics-the-dollar-game-bruce-edwards"
    }
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    "Authors: BRUCE EDWARDS",
    "Published: November 18, 2025",
    "Interview with Kenneth Rogoff, chess grandmaster-turned-economist, on the rise and potential decline of the US dollar as the dominant reserve currency.",
    "Rogoff’s book: Our Dollar, Your Problem, examines the rise of the US dollar and what might cause it to fall.",
    "Interview edited for length and clarity; full interview available as podcast.",
    "World War I and World War II:",
    "Postwar monetary arrangements:",
    "Institutional setting:",
    "Competitors and market dynamics:",
    "Market-share vs. ranking:",
    "Rising interest-rate environment:",
    "Fiscal consequences:",
    "Policy complacency and political constraints:",
    "Scenario risks cited:",
    "The yen and Japan:",
    "China:",
    "Preserve central bank independence to maintain credible monetary policy and control inflation.",
    "Address rising debt and deficits to avoid forcing investors to demand higher interest rates to absorb supply.",
    "Reassess the political and fiscal response to higher long-term interest rates to prevent debt service from crowding out other priorities.",
    "Consider the international implications of domestic monetary and fiscal choices, given the dollar’s central role.",
    "1969: Rogoff’s first exposure to non-dollar-dominated world (Yugoslavia trip).",
    "1971: Nixon ended dollar convertibility to gold.",
    "2001–03: Kenneth Rogoff served as IMF chief economist.",
    "1982: Rogoff’s first visit to the IMF and wrote on central bank independence.",
    "early 2000s: Period when IMF advised China to abandon the peg.",
    "“perhaps 40 percent of global GDP”: US share after World War II (as described by Rogoff).",
    "“Asia is half the dollar bloc”: current composition of the dollar bloc (Rogoff’s statement).",
    "“more like a quarter or a third”: hypothetical size of Asia’s share of the dollar bloc absent China’s peg.",
    "“2 percent mortgage suddenly jumps to 7 percent”: example of borrower pain from rising rates.",
    "Interest payments have “nearly tripled relative to GDP in a short period.”",
    "Interest payments are “bigger than defense expenditure.”",
    "**The Dollar Game**"
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