The Humbling of the Once Almighty Dollar

- Paul Krugman is a Nobel Prize-winning economist and New York Times columnist, known for his work on international economics and trade theory. This piece is from his Substack newsletter. - For decades, the US dollar has been the world's dominant reserve currency—used for global trade, held by central banks, and relied on as a safe haven. This "exorbitant privilege" allowed the US to borrow cheaply and run persistent trade deficits. - The core argument: The dollar's unique status is eroding. Key signs include central banks diversifying into gold and other currencies (especially the Chinese yuan), and US sanctions weaponizing dollar access, pushing countries like Russia and China to build alternative payment systems. - This matters because if the dollar loses its central role, the US could face higher borrowing costs, a weaker currency, and more inflation—constraints that other countries already live with. Krugman frames this as a slow, ongoing process rather than an imminent collapse.