On the fourth statement, about whether weaponizing dollar finance is likely to lead to a significant shift away from the dollar as the dominant international currency, reactions were much more mixed than on any of the other questions. Overall, across both panels, 24 percent agreed, 36 percent were uncertain, 36 percent disagreed, and 5 percent strongly disagreed.
Among those who agreed, Jan-Pieter Krahnen said, “This shift away from the dollar is under way already, as weaponizing of finance has become an element in international politics for years.” Robert Shimer remarked, “More true for countries like Russia and China that may fear future sanctions.” And Christopher Udry made a comment similar to those about an energy embargo being costly for Europe but nevertheless worthwhile: “Although I am not sure about the ‘significant.’ In any case, a price that is worth paying.”
Others who agreed suggested potential alternatives to the dollar. Darrell Duffie of Stanford commented, “With weaponization of dollar payments, workarounds would move moderately toward cryptocurrencies and other payment arrangements.” Lubos Pastor added, “Gold, crypto, and renminbi are likely to gain market share at the expense of western currencies such as the dollar.” Jose Scheinkman cautioned, “But since measures also involved the euro, the yen, sterling, and the Swiss franc, countries planning to invade democracies would be restricted to gold, crypto, or renminbi.”
Among those who said they were uncertain, Maurice Obstfeld of the University of California at Berkeley commented, “Not if it is only in cases like Russia now.” Franklin Allen explained, “Maybe in the long run the role of the dollar will fall, but in the short to medium term network externalities may dominate.” Jean-Pierre Danthine stated, “The dollar will remain the (somewhat less) dominant international currency.” And Abhijit Banerjee of MIT argued that: “All the forces that could lead to a move away from the dollar were already there. But maybe this could act as a sunspot.”
Several panelists who disagreed that the dollar will be diminished in status point to the size of Russia’s economy. Kjetil Storesletten said, “While Russia might try to rely less on dollars, the dollar’s dominant role will remain. Russia is too small.” Pol Antras of Harvard concurred: “Russia’s economy is small. Need to see China’s ultimate reaction, though.” And Peter Klenow of Stanford linked to recent data on the Russian share of world GDP and trade: 1-2 percent.
Others who disagreed drew attention to the absence of realistic alternatives to the dollar, some focusing specifically on China and its currency. Charles Wyplosz of the Graduate Institute, Geneva, asked, “Away from the dollar into what? Not renminbi, which is not really fully convertible.” Daron Acemoglu added, “What’s the alternative? Renminbi? It can be argued that China has ruined its international standing with its full-throated support for Russia.” Patrick Honohan noted, “This is not the first time dollar has been weaponized. And financial sanctions are not just by the US. The renminbi still has a long way to go.” Kenneth Judd argued that: “This use of dollar power is supported by all our friends. It would be difficult for China to end its use of the dollar.”
Finally, some panelists were doubtful about the prospects for any alternatives. Anil Kashyap commented, “Highly unlikely in the short run, and the dollar remains ‘the cleanest dirty shirt.’ What is the alternative? Doubt it will be crypto!” Ricardo Reis of LSE directed us to his research showing that: “It is hard to jumpstart alternatives, and then to make them grow.” And Richard Portes of London Business School concluded emphatically: “No serious alternative.”
All comments made by the experts are in the full survey results for the US and European panels.