Expert: "A crash in the dollar is coming"

The era of the U.S. dollar's "exorbitant privilege" as the world's primary reserve currency is coming to an end, said Stephen Roach, a faculty member at Yale University, Report informs, citing Bloomberg.

Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before.

As the economic crisis starts to stabilize, hopefully later this year or in early 2021, that realization should hit home just as domestic saving plunges. The dollar could easily test its July 2011 lows, weakening by as much as 35% in broad trade-weighted, inflation-adjusted terms.

The coming collapse in the dollar will have three key implications:

It will be inflationary — a welcome short-term buffer against deflation but, in conjunction with what is likely to be a weak post-COVID economic recovery, yet another reason to worry about an onset of stagflation — the tough combination of weak economic growth and rising inflation that wreaks havoc on financial markets.