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Perspectives: Beyond the dollar
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This episode features Kenneth Rogoff, Professor at Harvard University and former Chief Economist at the International Monetary Fund, in conversation with Volkan Benihasim, HSBC’s Global Head of Macro – FX, Rates and Commodities. They explore the evolution of dollar dominance and what could shape the next chapter – from central bank independence and fiscal discipline to the rise of the renminbi and digital finance.
Watch or listen to find out more.
This episode was recorded on the sidelines of the HSBC Global Investment Summit in Hong Kong in April 2026. Find out more here https://www.business.hsbc.com/en-gb/campaigns/global-investment-summit
Disclaimer: Views of external guest speakers do not represent those of HSBC.
Copyright © Kenneth Rogoff 2026, All Rights Reserved
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Transcript
HSBC Global Viewpoint Podcast Series Introduction
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
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Make sure you're subscribed to stay up to date with new
Episode Introduction from HSBC Global Investment Summit
00:00:16
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episodes. Thanks for listening, and now onto to today's show.
00:00:21
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Welcome to HSBC's Perspective Series and thanks for tuning in. We are recording this episode today from HSBC's Global Investment Summit here
Interview with Ken Rogoff: Former IMF Chief Economist
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in Hong Kong. I am Volkan Beniasim, global head of macro, effects, rates and commodities.
00:00:36
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I'm pleased today to be joined by Ken Ragoff with me. Kenneth is the former chief economist for the IMF. He is the author of the influential book Our Dollar, Your Problem, and he is currently a professor of economics and public policy at the Harvard University.
00:00:52
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Ken, welcome. ah Thank you for having
Evolution of the International Financial System
00:00:54
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me. For listeners who might not be aware, can you explain us the thinking behind our dollar, your problem, and how you saw this play out in real-world policy discussions?
00:01:06
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The international financial system's gone through an evolution. The dollar wasn't always at the center of the way it is today, but it was after World War II where it was placed at the center.
00:01:19
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Although understand that most of the world wasn't in the system. The Chinese were you know doing their own thing. The Soviet bloc used the Rupal and didn't really engage.
00:01:32
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India wasn't really involved. i could go on and on. It was really particularly a few countries, Europe, Japan, Canada. And it wasn't like it was today, where you think there's you know the dollar is just worth whatever it's worth.
00:01:49
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It used to be backed by gold. Now, not for you and me, but it was backed by gold to government. So if the Reserve Bank of India or the UK central bank, the treasury, they had dollars dollars. I mean, they weren't holding currency, they were holding treasury bills.
00:02:10
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They could come and they could get gold. So we were really still on a gold standard. i mean, there's some more issues with that, but that's how the world rolled till 1971.
Impact of Nixon's Gold Standard Decision
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It wasn't like the system today. There were you know other things going on around it.
00:02:25
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So yeah, the US s could do whatever it wanted, But it ultimately, if it was inflating like crazy, had to give it back in gold. And by the way, the countries that were in the system, mostly Europe, were pledged to peg their currency to the dollar.
00:02:44
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So you know the number of UK pounds or Italian lira that was set. So in a way, everybody was pegged to gold because you were pegged to the dollar and the dollar was pegged to gold.
00:02:57
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And in 1971, the US gave up on this. I've heard for a lot of reasons, but but it surprised people that everybody knew there were problems.
00:03:08
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The US was having inflation, the Vietnam War, the Great Society, where we increased our social spending a lot. People knew there was a problem, but they didn't know what happened so suddenly. And Nixon, at what point, said, OK, we're not going to do it anymore.
00:03:25
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And everybody was, what you know We're not going to be pegged to the dollar anymore. And so he sent his Treasury Secretary, who is a Texan, John R. Connolly, over to meet with the Europeans, who had as much reserves as the Asian central banks to do it today.
00:03:44
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And the Europeans said, what are we going to do with all these dollars? We thought they were good as gold. And Connolly said, it's our dollar. It's your problem. And I like that point because I know we Americans are arrogant, but I don't think that's actually how we should be in the world.
00:04:02
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But also there was an irony. that we didn't know what we were going to do when we stopped pegging the dollar to gold and we ended up you know blowing out inflation prices went up way a lot in fact you know people just lived through the pandemic and they thought that was bad that was nothing compared to what happened in the 1970s the interesting thing is that over time The US lost Europe.
00:04:31
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Europe is not on the dollar, as anyone traveling around Europe knows. They have the euro, or currencies pegged in the euro.
Dollar Dominance and Globalization Challenges
00:04:39
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But the dollar somehow, as the world globalized, as India went into the global system, as China especially went into the global system, countries adopted dollar-centric system.
00:04:54
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The dollar actually colonized a lot of the world. And my books about that rise, what some of the ups and downs. There were competitors.
00:05:07
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Japan was a healthy competitor at one time. Europe actually could have been, could have worked out better. So that's what motivated me to write write this book. that's That's very helpful and also for us understanding the historical reasons behind the current dominance as well. At this juncture, how should US balance the short-term leverage of this dollar dominance that is still there today versus the long-term risk of countries building credible alternatives in your view?
00:05:38
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Well, I think actually that ship has sailed. We have leaned on using the dollar as a weapon so much that China especially is working to develop other ways to do business to get away from the dollar. We did have a bit of a catastrophe in the 70s where inflation was high. The dollar lost a lot of status in that period.
00:06:05
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And we're sort of moving towards that problem again. We have such big debt deficits, so much debt, interest rate payments have become going towards being the biggest part of the federal budget.
00:06:19
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They're second now, but according to the Congressional Budget Office, going to be first. And at the same time, the central bank independence, which has been the way we've tried to anchor inflation by creating the central bank, by having it say, we will not allow too much inflation.
00:06:39
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I don't want to get into the little details. We won't let prices just go up too fast. sure That's where it's worked really well. But the Democrats have been unhappy with it. under the Republicans, Trump has been unhappy with it for various reasons. And so you like the fall of Rome, there are problems on the inside. And i just want to add, I don't think the dollar is going out of business, but I think we're going to lose business. I think the renminbi is very important coming on. China's the core of Asia. Asia's half the dollar block, and we're probably you know going to lose some of this business. I think the dollar will stay
00:07:19
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king of the hill, but a smaller hill than it was on. Interesting. So let's continue from that point then. Let's assume that a meaningful shift towards Chinese renminbi may happen.
00:07:31
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For that to be meaningful, say, over the next decade, what would be required, what actions would be required for China to make it a meaningful competition for USD?
China's Role in Challenging Dollar Dominance
00:07:41
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So I think the most important thing is they need to open up their government treasury bill market, make it easy,
00:07:48
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for you know your mother to hold Chinese debt. It's very easy to hold U.S. debt and it should be equally easy to hold Chinese debt. They don't have to open up that every Chinese firm can be bought by Americans, that everything's for sale in China. They don't have to go that far. It's about the currency and they need the currency to be easily traded and especially the Treasury bills. Another thing they need to do that's a piece of this is they want to develop their own banking system, their own international banking system. And what I really mean by that is not a bank so much as a mechanism for trading between countries without it going through the United States. One of the privileges that the U.S. has had of being the center
00:08:38
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is we have been able to force a lot of the world's transactions to go through the United States. Believe it or not, when China trades with Egypt, there's a fair chance that that touches the dollar.
00:08:53
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Even if the whole transaction didn't seem to be in dollars, it ends up evolving the dollar one way or the other. And that means Donald Trump can see it.
00:09:04
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Donald and Trump could ban it in a way. And they need to develop their own mechanism for doing that. And by the way, you're asking about China. I think Europe's going to get a piece of this. but Europe is the the second most important currency now. But they've fallen from where they were 15 years ago. I think the European debt crisis in the early twenty ten s undermined confidence in the euro. But they have to you know find ways to do the same things as China.
00:09:33
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That's a very good point. Thank you for that. Now, let's, I guess, look at the same equation from the other side and let's approach it from the US's point of view.
Dedollarization and the Rise of China's Economic Power
00:09:41
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From their point of view, what early signs of this dedollarization concerns you do most?
00:09:48
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And could they be reversible? I mean, some of the problems, I think we the dollar just reached a peak that's difficult to maintain because they're important regions and especially China, who have a very strong interest in having more power over the system. And even if it costs China they're going to invest in that. Even if they have to lose some money in their trade, they're going to invest in that. They can't afford to have things stay the same. And China may not surpass the United States
00:10:26
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at as early as many predictions. Maybe it'll never even be fully equal, but it's gonna be of a similar size. By some measures it's bigger, by some it's smaller, but China's growing and China's importance is growing. So this is gonna happen, they're gonna figure it out.
00:10:44
Speaker
But certainly things we could do to strengthen the dollar number one is protect central bank independence. Why do I say that that sounds very esoteric well if you want everybody to hold dollars you better convince them you're not going to make it worthless and there's no better way to do that by separating the central bank which governs what the dollar's worth from the rest of the government. The rest of the government just wants their greedy paws in there, and the central bank needs to be protected. That, believe it or not, is a relatively new concept.
00:11:22
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I actually think I wrote one of the first papers about it. You have to protect that. It has been under assault. And then the second thing is you can't just constantly run giant deficits.
00:11:34
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I don't think there's any you know clear end to this, but the our debt relative to our income is more or less at an all-time record.
00:11:45
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And we're running record deficits. So a debt is how much you owe. what's you know what's your past bill, and the deficits, what you're racking up each year.
00:11:56
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So we need to you know try to address
Digital Finance and Cryptocurrencies: The Future of Currency
00:12:00
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those questions. Looking at the future, obviously, rise of digital money, digital asset, digital finance, if you like, all those rails. How should we bring these future developments into the discussion that we had today so far? Would it in a way make dollar more dominant or it will in a way have further fragments in the dollar hegemony or is not that relevant? How do you see that developing or how do you see that relevancy? well It's hard to know how it will play out. It's, you know, in some sense that the innovations are not so different than things we've had in the past. Once upon a time, checks were an innovation, then credit cards were an innovation, debit cards, electronic transfers, and in a way, these new digital currencies are in a way a further evolution. I think on the whole, they probably undermine dollar dominance for two reasons. One is straight up cryptocurrencies like Bitcoin, that's a that's a competitor for the dollar. sure Not in legal transactions, but a lot of transactions are, we call them underground. And you go, well what's that?
00:13:08
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Tax evasions, like a big one, but also capital flight from one country to another country and you don't want your government to know about it. And of course, there's, you know, drug trafficking, illegal arms sales, human trafficking. Underground economy. me Yeah, the underground economy. that The dollar dominates in that and cryptocurrencies are stepping in.
00:13:31
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um But the other you know the other way that I think it could undermine the dollar is that when China and Europe go to replicate the current banking system, they don't have to follow the old system. I mean, some of the computer systems, some of the clearing systems are 40, 50 years old They can use these newest technologies. It's much cheaper. So it's very it's much easier in many ways for China or Europe to develop something they can offer to the private sector. And and they're doing that. I would say China it had been going strong already.
00:14:14
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Europe was energized by Greenland. There had been a lot of Europeans thinking, well, we don't need to do that. The US never going to weaponize the dollar against us.
00:14:26
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And now they've seen what can happen. It could be different. I guess in a way we can sense that we can think of a future, maybe not immediately, but slowly getting away from dollars with other alternatives. More multipolar. More multipolar. The dollar on top, but losing market share. What does that mean? It means interest rates in the U.S. will go up.
00:14:47
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because part of why they're so low is foreign holdings. As we move towards that multipolar world, those different currencies being used with dollar at top and then they are coming up. bit of a theoretical question, but in your view, what would that mean for financial stability? What would that mean if and when the world faces another 2008 crisis in 10 years time, 20 years time?
00:15:08
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I mean, it's ah a less stable world to have it be multipolar because now there's more volatility. But I don't think it's that big a deal. In 2008, the U.S. recognized that many countries were using dollars. And when dollars dried up very suddenly, our central bank, our Federal Reserve,
00:15:31
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gave them short term loans to many of the countries to sort of calm down their markets. These markets, these countries could produce their own currency, but because the dollar was being used, they they didn't have it, they couldn't print it.
00:15:48
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But Europe can do the same thing. China can do the same thing. China's on top of this. They view this actually as the number one first step towards internationalizing their currency. And I think they have swap lines with 39 different countries now. And Europe, less so, but they're moving
Advice for Policymakers on a Multipolar Financial Future
00:16:07
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into it. If then that is the world that we are moving towards, I guess one final thing I would like to ask to the global policy makers, what would be your top recommendation in this future that we see managing the challenges of the dollar dominance moving that towards the multipolar world?
00:16:26
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Well, I've mentioned central bank independence for the US. I think this is a device that is just working very, very well. And that's for US beyond US? No, no, for everybody. No, no, for everybody. Central bank independence is ah very useful. Even if you're an emerging market and everything's very volatile, central bank independence helps. I suppose the other is that we're, i believe, living in a world of higher interest rates, higher for a very long time.
00:16:55
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And in that world, debt is more burdensome. If you need to borrow, by all means, borrow. But I think this world that everyone had gotten used to where debt was free, you didn't worry about it so much, many people in advanced economies thought that, that's gone.
00:17:13
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And it's more like a world that emerging markets have worried about for a long time, where when you borrow too much, you can get in trouble faster. And I think policymakers in the rich countries who very smugly thought, that's never going to happen to us.
00:17:31
Speaker
Just like in 2008, they thought banking crises are never going to happen to us. They're going to find out debt crises can happen to them. Well, that's all we have time for today. Thank you very much, Ken. That was very insightful.
00:17:44
Speaker
Thank you for having me Thank you for joining us at HSBC Global Viewpoint. We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.