Foreign Policy Live Why the Dollar’s Decline Matters
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Jul 25, 2025 
Kenneth Rogoff, a Harvard professor and former chief economist at the IMF, dissects the recent 10% decline of the U.S. dollar. He discusses whether this drop signals a severe threat to the dollar's dominance as the global reserve currency. The conversation touches on historical parallels with past economic decisions, the potential rise of alternative currencies, and the implications for U.S. foreign policy. Rogoff highlights that the dollar's weakening could reshape international alliances and economic strategies amid rising global tensions.
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Dollar's Historic Value Correction
- The dollar's 10% decline this year is a correction from historically high levels seen since 2002 and the Reagan era.
- This decline normalizes the dollar value but signals complex shifts in foreign central bank holdings and global finance.
Dollar's Role Beyond Currency
- A strong dollar keeps U.S. interest rates and borrowing costs low across government and consumers.
- The dollar's global dominance also enables U.S. sanctions and intelligence capabilities that enhance geopolitical power.
Trump's Dollar Privilege View Critiqued
- Trump's claim that the dollar's "exorbitant privilege" burdens Americans is unconventional and largely unconvincing economically.
- The strong dollar actually benefits the U.S. economy via lower interest rates despite making some exports less competitive.
