Barry Eichengreen, monetary historian and professor at the UniveRSIty of California, Berkeley, says he has revised his view on how fast the U.S. dollar could lose its dominant status. Rather than a gradual decline, he fears an abrupt collapse in market confidence before viable alternatives are fully ready to take over. He points out that fragility in the U.S. Treasury‑bond market, peRSIstent central‑bank gold buying, and America’s choices over payment‑technology frameworks are together amplifying doubts surrounding the dollar‑based system.
In an interview, Eichengreen stated his long‑term outlook for the dollar has not been completely reversed, yet his perspective on how risks might materialize has shifted markedly. He traces the origins of this heightened concern to April 2, 2025, the day the Trump administration proclaimed “Liberation Day”. “Since then I have grown far more worried about an abrupt shift: confidence in the dollar could vanish before alternative currencies are prepared to step in,” he commented.
Dollar Reserve Share Slips Gradually; Inflows Are Not Flowing to the Euro
Eichengreen emphASIses that the dollar’s share of global foreign‑exchange reserves is not plummeting, but instead edging down roughly 0.5 percentage points per year over the long run, from just above 70% at the turn of the century to just under 60% today. Still, research he conducted with co‑authors examining annual reports from around 80 central banks reveals that the ground lost by the dollar has not flowed predominantly into euros.
He notes the euro has “captured almost none” of the ground surrendered by the dollar across the 21st‑century reserve landscape. The renminbi has absorbed about one‑quarter, while the remaining three‑quarters have gone to “non‑traditional reserve currencies”: Australian dollar, Canadian dollar, Singapore dollar, New Zealand dollar, Nordic currencies and the South Korean won. Common traits shared by these currencies, in his view, are that they stem from “small, open, well‑governed economies that typically pursue inflation‑targeting regimes”.
In Eichengreen’s assessment, the euro has failed to benefit materially because the pool of euro‑denominated sovereign assets available to global investors remains limited. Only three euro‑area sovereign governments hold AAA ratings across all major rating agencies, with corresponding bonds totalling approximately $4 trillion, compared with roughly $40 trillion in outstanding U.S. Treasury securities. Meanwhile, German banks hold German government bonds and Dutch insurers hold Dutch government debt. Fragmented national markets hinder the formation of a genuinely unified, sufficiently deep pool of safe‑haven assets.
Central‑Bank Gold Purchases Are Not Purely Anti‑Dollar
Turning to the gold boom, Eichengreen argues that large‑scale central‑bank gold accumulation dates more closely to the global financial crisis than to direct resentment toward Washington. Emerging‑market central banks historically held very little gold to begin with, so early rounds of buying represented largely “structural catch‑up”.
More‑recent gold‑buying sprees reflect two overlapping drivers: continued portfolio replenishment alongside mounting worries over the dollar and U.S. Treasury‑bond markets. He mentions circulating reports of “extraordinary intervention” by the U.S. Treasury within bond markets, which further fuel external doubts over the stability of dollar‑denominated assets.
Eichengreen also notes that France, Germany and the Netherlands have repatriated gold reserves from overseas vaults amid political pressure, though this does not automatically signal loss of faith in the global financial system. Gold stored in London or New York can serve as collateral in financial transactions and generate interest income; repatriation means giving up those practical benefits. Accordingly, repatriation tends to be pursued chiefly by nations “holding far more reserves than they reasonably require”, and central banks make such decisions with “full awareness of what they are trading away”.
Gold Preserves Value but Cannot EASIly Fulfil Payment Functions
Discussing whether gold can become a genuine monetary substitute, Eichengreen stresses that money must serve three core purposes: unit of account, medium of payment, and store of value. Gold excels at, at most, one of these three roles. He poses a rhetorical question: would anyone wish to receive wages denominated in ounces of gold, when gold prices can swing by 10% within a single month and drastically alter everyday purchASIng power?
He cites a case study featured in his new book: sanctioned Venezuela needed to pay Iran for oil‑field equipment and maintenance services, also under sanctions. Settlement was eventually arranged using physical gold bars, and two Russian aircraft were chartered to fly bullion from Caracas to Tehran. To him, the episode “illustrates nearly perfectly how difficult routine payments using gold really are”.
Even so, Eichengreen does not view gold as entirely disconnected from the global system. He describes gold as “a respectable, traditional commodity allocation for central‑bank reserve managers”, and says globally diveRSIfied investors ought to hold some commodity exposure within portfolios. He declines, however, to recommend a specific portfolio weight for gold, noting that lies outside his sphere of expertise.
He also discloses he has not actively purchased gold personally, and only possesses some gold jewellery inherited from his late mother: “We value those pieces, yet I have not bought additional gold.”
U.S. Treasury Fragility and Risks of “Financial Repression”
Eichengreen voices more direct concerns regarding U.S. fiscal health and Treasury‑bond markets. The United States is clearly on an unsustainable fiscal trajectory, he says, with the debt‑to‑GDP ratio continuing to climb, and Treasury investors are more alarmed about this reality than ever before.
For decades, Treasury bonds were treated as the “safe bedrock” of the classic 60/40 investment portfolio. If Treasuries become “less safe” and show higher correlation with equities, investors will have good reason to cut bond allocations and seek alternative assets, gold being one prominent example.
Still, Eichengreen offers no concrete gold allocation percentage. Those such as Ray Dalio advocating 10‑15% gold weightings tend to forecast fiscal and financial crises on a peRSIstent bASIs; “they keep predicting until one day they get it right”, he observes. He also references Saxo Bank’s Ole Hansen, who previously proposed a 5‑10% allocation toward hard assets.
In his view, history sends discouraging signals should the U.S. government eventually require central‑bank financing for its debt. “Nothing good tends to follow,” he states plainly. That scenario typically brings financial repression: forcing banks and other financial institutions to hold government debt while compelling central banks to maintain artificially low interest rates. Such measures hardly inspire international investor confidence in a currency.
Stablecoin Rivalry Could Shape the Dollar’s Future
Eichengreen extends his analysis to payment‑system technology. He argues the United States may be betting on the wrong digital‑currency roadmap. The GENIUS Act, enacted in July 2025, represents America’s first federal law governing payment‑oriented stablecoins. It mandates issuers fully back each token 1‑to‑1 with cash, deposits and short‑term U.S. Treasury securities, publish monthly reserve disclosures, and undergo independent auditor reviews.
In his reading, this hands the digital future of the dollar to private‑sector firms, while requiring them to hold Treasury securities. Meanwhile Europe and China are advancing central‑bank digital currencies (CBDCs). Historical trends, Eichengreen suggests, favour publicly‑backed stable money rather than competing private monies. Thus Europe and China “may prove correct over the long run”, whereas America’s wager on private‑label stablecoins “could turn out to be mistaken”.
He warns that failure to achieve broad stablecoin adoption would undermine the dollar’s ongoing role within the global system. He recalls March 2023, when Circle revealed $3.3 billion of cash reserves backing its USDC stablecoin were trapped inside the failed Silicon Valley Bank, accounting for roughly 8% of total reserves. USDC briefly slumped to $0.87, regaining stability only after U.S. regulators stepped in to guarantee deposits. If stablecoin reserve holdings shift further toward Treasury securities going forward, one unresolved regulatory question remains: would the Federal Reserve be forced to act as lender‑of‑last‑resort for non‑affiliated private stablecoin issuers?
Past Misjudgements on the Dollar’s Fate, Yet Revising Conclusions
Eichengreen openly admits he has gotten calls wrong previously. In his 2011 book “Exorbitant Privilege”, he forecast the dollar would give way to the euro and renminbi — a prediction that proved premature. At that time he failed to recognise capital flows were shifting not toward euros or renminbi, but toward those non‑traditional reserve‑currency jurisdictions.
Quoting John Maynard Keynes, he says views ought to change when evidence contradicts prior assumptions. Drawing together shifts unfolding across the dollar, gold, Treasuries and stablecoins, Eichengreen’s core takeaway is this: the real risk to watch is not slow dollar retreat, but an abrupt swing in market sentiment at some point in time, which would send ripple effects through the global financial system, bond markets and investor portfolio allocations.
Notably, Federal Reserve Chair Jerome Powell will deliver his opening keynote address at the Jackson Hole Symposium on Friday. This year’s conference centres on financial innovation and payments rather than interest‑rate settings, placing exactly these topics raised by Eichengreen squarely onto the Federal Reserve’s agenda.
Barry Eichengreen is currently Professor at the UniveRSIty of California, Berkeley. His new book “Money Beyond Borders” is published by Princeton UniveRSIty Press.