What if the US dollar’s reign as the world’s dominant currency is coming to an end—not with a bang, but with a slow, steady erosion? Harvard economist Ken Rogoff, former chief economist at the International Monetary Fund, doesn’t mince words in his assessment. In his new book Our Dollar, Your Problem, Rogoff argues that America’s monetary supremacy faces unprecedented challenges from soaring debt, political dysfunction, rising global rivals, and the use of the dollar as an instrument of digital surveillance. In a recent interview on Financial Sense Newshour, Rogoff shared his perspective on where he sees things headed.
Listen: Ken Rogoff on “Our Dollar, Your Problem”: Debt, China, and the Dollar’s Fragile Reign
Lucky Breaks and Lost Opportunities
The dollar’s rise to global dominance wasn’t just about American ingenuity—it was also about competitors shooting themselves in the foot. “The single biggest thing was that the Soviet Union, which was by far the economic rival…made this critical decision in the mid-60s not to do basically what China has done,” Rogoff explains. Europe hobbled the euro by including Greece, Japan “didn’t need to fade to zero,” and China “stuck with the dollar too long.”
These missteps by rivals gave America an outsized advantage. But Rogoff warns against complacency: “I think we’ve done a lot of things right. But to reach such dominance as we did certainly 10 years ago, when I think it peaked, we had some good turns.” The implication is clear—luck doesn’t last forever, and neither does unchallenged dominance.
The Yuan’s Asian Century
While many dismiss the Chinese yuan as a serious threat to the dollar, Rogoff sees a different future unfolding. China doesn’t need to become a liberal democracy to challenge dollar dominance in Asia. “They don’t need to get that far to be an Asian currency,” he argues. With China already the biggest trading partner for more than half the world’s countries, the pieces are falling into place for regional currency blocs.
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The parallel Rogoff draws is striking: just as Europe was once “the center of the dollar bloc” before breaking away, Asia—which represents half the current dollar bloc—could follow suit. “I think we will lose a substantial part of Asia,” he predicts. “It’s not so much what China is doing, it’s that it cannot afford to be so dependent on the dollar when they intend to have bigger frictions with us.”
The Dollar as a Tool of American Intelligence
One of the most striking points Rogoff raises is the often-overlooked link between the dollar’s international dominance and America’s intelligence reach. The United States’ ability to monitor global financial flows—thanks to the ubiquity of dollar-denominated transactions—has become, as Rogoff puts it, a “big part of our spycraft.”
Because the vast majority of cross-border payments are routed through U.S.-controlled banking infrastructure, American authorities can track, freeze, or block assets virtually anywhere in the world. This financial surveillance capability has become a cornerstone of U.S. power projection, enabling not only the enforcement of sanctions but also the gathering of critical intelligence on adversaries and illicit networks.
But Rogoff cautions that this unique advantage is under threat. As rivals like China and blocs like the European Union invest in alternative payment systems and “build their own rails,” the U.S. monopoly on global financial data is starting to erode. The incentives are clear: “It’s not just about transacting in another currency,” Rogoff explains. “It’s about building other back offices, so that you can clear a transaction without Washington seeing it.”
The gradual shift away from dollar-based systems could limit America’s ability to gather strategic financial intelligence—a development with profound implications for both national security and foreign policy leverage. As Rogoff suggests, the decline of the dollar’s central role isn’t just an economic story; it’s a geopolitical and intelligence story as well.
The Sanctions Boomerang
America’s use of financial sanctions as a foreign policy tool has been effective, but it comes with a price. “The Chinese are looking at what we did to Russia, so are other countries,” Rogoff notes. With financial sanctions currently imposed on over 20 countries and countless entities, the world is actively building alternative payment systems.
“It’s not just transacting in another currency, it’s building what we call rails, other back offices, so that you can clear a transaction without Washington seeing it,” he explains. Europe and China are moving “full speed ahead” on these alternatives. The strategic advantage America gains from monitoring global transactions—”a big part of our spycraft”—is gradually slipping away.
The Debt Time Bomb
Perhaps no threat looms larger than America’s ballooning debt. Since the 2008 financial crisis, US debt has doubled, and both political parties show no appetite for fiscal discipline. “Whoever’s in power is just running a big deficit, even if we’re booming, and we become less and less resilient,” Rogoff observes.
The danger isn’t immediate default but diminished capacity to respond to future crises. “You’re using up your ammunition. You’re using up your option value of being able to generate a lot of debt,” he explains. With 10-year interest rates potentially reaching 5-6% in five years and debt continuing to climb, America’s financial flexibility is evaporating just when geopolitical tensions suggest it might be needed most.
Europe’s Military Awakening
One unexpected consequence of current geopolitical shifts is Europe’s potential emergence as a more serious currency competitor. “Trump is the best thing that ever happened to Europe. He is forcing them to become able to take care of themselves,” Rogoff argues. As European nations finally build genuine military capabilities—a prerequisite for currency power—the euro could gain significant ground.
The challenge for Europe is moving beyond national militaries to create a unified force. But Rogoff invokes Churchill’s famous observation about Americans always doing the right thing after trying everything else, suggesting Europe may follow a similar path.
A Multipolar Future
Looking ahead 10-20 years, Rogoff envisions a fundamentally different global financial landscape. “We’re going to live in a more multipolar world where China will have succeeded in making much bigger inroads into Asia and some of the developing world,” he predicts. Europe will likely have strengthened both militarily and financially, and America will probably have weathered another inflation and fiscal crisis.
The dollar will remain “king of the hill,” but as Rogoff pointedly notes, “it’s not as big a hill as we are on now.” This isn’t about the dollar’s collapse but about its relative decline—a shift from overwhelming dominance to first among equals in a more balanced global system.
Rogoff’s analysis leaves little room for complacency: absent urgent fiscal discipline and renewed global engagement, the dollar’s era of effortless primacy will steadily give way to a world where America must compete for trust it once took for granted.
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