The role and status of the dollar and American capital markets remain at the center of the global economy.
Any attempt to either directly or indirectly devalue the dollar or reduce the primary reserve status of the greenback risks opening Pandora’s box with respect to capital flows and global finance.
Global liquidity indicators show that there is simply no global capital market without the dollar and U.S.-based finance.
The dollar remains the currency of choice for emerging markets. The dollar’s percentage share of emerging market bonds stands at 86.3% and is 81.7% of all credit.
In addition, as banks have stepped away from global finance, private actors have stepped in to fill the void; hence, the critical role of private equity and private credit both in the U.S. and globally. The accompanying chart illustrates the centrality of the U.S. in international capital markets.
Loose and undisciplined talk around devaluing the dollar, ending the dollar’s reserve currency status or a debt restructuring of the U.S. portfolio is premature and reckless in our estimation. It risks the credit rating of the U.S. and creates unnecessary risk throughout the global financial system.
Read more of RSM’s insights on the global economy and the middle market.
