Our Dollar, Your Problem
The Economist wrote: “As investors question America’s stability, the risk is that they reduce their appetite for American assets and, by extension, the dollar.” Bloomberg reports that America will have less geopolitical and economic leverage if investors and central banks hold more kinds of currency. There is growing public interest, as well as concern, in the role and strength of the dollar. The interlinkages between finance, trade, and security in the international political economy are becoming increasingly apparent. Against this backdrop, marked by U.S. political dysfunction, global debt problems, the dollar’s decline following President Trump’s tariff announcement, and China’s push to move away from the dollar bloc, Kenneth Rogoff’s Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance, and the Road Ahead has been an extraordinarily timely and insightful read for me this month. The book was written before the 2024 election and published in 2025, and it reflects Rogoff’s experience as the Maurits C. Boas Chair of International Economics at Harvard and as a former chief economist at the IMF.
One must read through the book to fully understand its title. Our Dollar, Your Problem is strategically divided into six parts, each exploring past and present challenges to dollar dominance. Early sections review the roles of the Russian ruble and Japanese yen. Rogoff argues that Europe’s inability to provide for its own defense limits the euro’s potential as a dominant currency. He further explains that Europe’s lack of a capital markets union, an integrated banking system, and unified government debt markets handicaps the euro in competing with the dollar.
Rogoff emphasizes that China’s fear of sanctions is a major impetus for its efforts to internationalize the renminbi, develop a central bank digital currency, and create parallel financial infrastructure outside the reach of U.S. oversight. The renminbi, therefore, may appear to be the most potent threat to the dollar. Yet Rogoff cites the IMF’s 2024 projection that China’s government debt will exceed 100 percent of GDP by 2027. Moreover, China’s statistics have become politically sensitive, raising questions about their reliability. For these reasons, along with China’s weak rule of law, debt burdens, and market illiquidity, Rogoff sees little chance that the renminbi will gain wide use in the West in the foreseeable future. This does not mean, however, that the dollar will maintain its dominance in Asia.
The book’s case studies of fixed exchange rate crises in Thailand, Brazil, Mexico, Argentina, and Lebanon are particularly eye-opening. They demonstrate that politics can override economic fundamentals and financial markets for long stretches. Rogoff contends that fixed exchange rates are sustainable only in rare circumstances; instead, most countries should adopt flexible exchange rates with inflation targeting and central bank independence.
Our Dollar, Your Problem explains why the U.S. has sustained its advantage as the issuer of the world’s reserve currency. Americans’ greater appetite for risk in foreign investments, the U.S.’s first-mover advantage after World War II, and the country’s immigrant networks linking capital back to their homelands all play important roles. Ultimately, Rogoff argues that sustaining a dominant currency is inseparable from being a geopolitical superpower: the global financial system depends on rules, and the country with both economic and military strength has enormous power to shape those rules.
Some key takeaways include:
Overheated asset prices combined with slowing growth often precede financial crises.
A country’s current account balance depends not just on the exchange rate but also on productivity, interest rates, savings, and business cycles.
The timing of economic crises is notoriously hard to predict.
The “middle-income trap” explains why many countries fail to catch up to richer ones despite favorable economic forces.
Competitiveness hinges not only on exchange rates but also on domestic wages and prices.
High tax rates often correlate with larger underground economies.
The greatest long-term challenge for central banks may be unsustainable government debt.
In practice, U.S. tax cuts have almost always significantly increased the deficit.
Later chapters address the near-term economic implications of AI. Rogoff suggests that AI could be inflationary, given the large investments in energy and computing it will require, and that it could fuel internal social conflict by disrupting jobs and reshaping income distribution.
Rogoff then concludes there are many reasons to believe that the Pax Dollar era has peaked. For me, Our Dollar, Your Problem underscores how finance, politics, and security are inseparable in today’s world. The dollar is not simply a unit of exchange; it is a mirror of America’s credibility, resilience, and global influence. If Rogoff is right that the Pax Dollar era has peaked, then the pressing question becomes whether the U.S. can adapt its institutions and alliances to preserve confidence in its leadership. The answer will shape not only markets but the contours of international order itself.
