Goldman Warns the Dollar's Grip on Global Markets Might Be Over

published 28.07.2020 13:26

Goldman Sachs Group Inc. put a spotlight on the suddenly growing concern over inflation in the U.S. by issuing a bold warning Tuesday that the dollar is in danger of losing its status as the world’s reserve currency.

With Congress closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy, and the Federal Reserve having already swelled its balance sheet by about $2.8 trillion this year, Goldman strategists cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign-exchange markets.

While that view is clearly still a minority one in most financial circles -- and the Goldman analysts don’t say they believe it will necessarily happen -- it captures a nervous vibe that has infiltrated the market this month: Investors worried that this money-printing will trigger inflation in years ahead have been bailing out of the dollar and piling furiously into gold.

There are now, they said, “real concerns around the longevity of the U.S. dollar as a reserve currency.”

Ballooning Debt Pile For Goldman, the growing level of debt in the U.S. -- which now exceeds 80% of the nation’s gross domestic product -- and elsewhere, boosts the risk that central banks and governments may allow inflation to accelerate.

by John Ainger from bloomberg.com

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