While waiting on the Senate to proceed forthwith with the impeachment trial, here’s a must-read post by econ prof Roncesvalles of Siliman U. on how the US dollar got so mighty (gold standard and not) and whether we should stay with the dollar bloc, given current realities.

Letter from Dumaguete
June 8 2025

CURRENCY BLUES
Orlando Roncesvalles

All the jazz about dollar hegemony

Behind the easy sidewalk question — Why is the US dollar everywhere in the world economy? — are serious ‘pocketbook’ issues. Why do we have inflation? Can we avoid financial panics and crises? Are cryptocurrencies as good as gold? What will happen to the peso exchange rate?

In his latest book (Our Dollar, Your Problem, 2025), Kenneth Rogoff provides some answers by surveying the broad landscape of economic events since 1945, when the last world war ended. The book is essential reading because the author was also the chief economist at the International Monetary Fund in 2001-03. He keeps the reader grounded in historical facts. He sheds light on issues of interpretation and controversy that the economics profession has confronted.

Among these issues are how the US dollar came to be the dominant global currency, how the monetary arrangements agreed by the Allied countries in 1944 that provided for the fixed exchange rate system became obsolete, and, importantly, for an aspiring middle-income country like the Philippines, what policy advice should be heeded by the country’s economic managers.

In this connection, Rogoff talks about the Tokyo Consensus as an improvement on the Washington version (more on this below).

Finally, Rogoff discusses the present-day debt and inflation problems in rich and poor countries that portend financial crises in the coming decade.

Rogoff views the dominant role of the US dollar as something that has not been threatened by alternatives like the Soviet ruble, the Japanese yen, the euro, the Chinese renminbi, or cryptocurrencies. The explanations are somewhat unique in each case.

However, the most crucial factor is the size and depth of the exchange and financial markets where the dollar is involved.

Apparently, for whatever reason, people residing outside the US who have their own national currency prefer to treat the US dollar as the vehicle currency for their international transactions.

READ ON: the Soviet ruble, International monetary arrangements,  the Japanese yen, the euro, the Chinese renminbi, cryptocurrencies