Kenneth Rogoff is Maurits C. Boas Professor at Harvard University, and former chief economist at the IMF. His influential 2009 book with Carmen Reinhart, This Time Is Different: Eight Centuries of Financial Folly, shows the remarkable quantitative similarities across time and countries in the roots and aftermath of debt and financial crises. Rogoff is also known for his pioneering work on central bank independence, and on exchange rates. His monthly syndicated column on global economic issues is published in over 50 countries. Rogoff’s May 2025 book Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance and the Road Ahead, offers a sweeping view of the post-war rise of the dollar, the challenges the rest of the world has in dealing with it, and how this experience can help inform the contours of the evolving new global financial system.
Dr. Rogoff recently sat down with Circle Co-Founder, CEO, and Chairman Jeremy Allaire to talk about financial history, potential threats to the dollar, and the importance of getting US stablecoin legislation right.
Jeremy Allaire
Your last book, This Time is Different: Eight Centuries of Financial Folly, was a New York Times best seller and has become one of the foundational texts of economic history. It still exerts an immense influence on how we think about the 2008-2009 financial crisis. Now you are turning your attention to the dollar. Your newest book – Our Dollar, Your Problem – comes out this spring. What can you tell us about the book?
Ken Rogoff
This Time is Different, co-authored with Carmen Reinhart and a product of seven years of research, came out just as the 2008-09 global financial crisis was unfolding. Using a variety of quantitative metrics across more than twenty countries, we showed that the typical recession associated with a financial crisis was typically much deeper and longer-lasting than a normal recession. We also provided metrics about how unemployment, stock prices, housing prices and debt typically unfold before and after. Most experts viewed our historical metrics as far too pessimistic if taken as a baseline for the global financial crisis. In fact, they proved much more useful than estimates drawn from conventional macroeconomic models such as central banks employ. The conventional models use sophisticated analytical frameworks and statistics, but are typically estimated only over a few decades of data. Unfortunately, one cannot understand hundred-year floods by looking only at the last 30 years.
“Fully-backed stablecoins that are pegged to the US dollar, if properly regulated, almost surely enhance dollar dominance rather than challenge it.”
-Dr. Ken Rogoff
Some of these themes do play out in my new book. As an example, the book looks at real interest-rate dynamics using seven centuries of data instead of just a few decades, as was the case with virtually all previous academic papers that aimed to understand the post-financial crisis, low-rate environment. A long view suggests that economists should never have been so confident that real rates are drifting inexorably downward, as opposed to eventually reverting to trend.
Our Dollar, Your Problem, however, is quite different from the previous book in style and focus. The first part of the book explores how the dollar has continually risen in influence despite being challenged in turn by Russia, Japan, Europe, and China. It also looks at the profound difficulties smaller countries have had dealing with dollar dominance in a world where the US pretty much always looks out for itself first. To help motivate the issues, and to provide historical context, the book is laced with anecdotes from my life as an economist, including meetings with top policymakers and world leaders. I think it is very important for people to understand that it wasn’t really until the late 1970s that it became fully clear how marginal the Russian ruble would become, and how in the 1980s, the conventional view was that the Japanese yen would be a major rival to the dollar.
The book’s title derives from a famous John Connally quote. Connally served as US Treasury Secretary in the Nixon administration. Nixon took the United States completely off the gold standard in 1971 and declared that the foreign governments could no longer trade their dollars for gold. Foreign finance ministers, who had been watching US inflation start to spin out of control, were furious and asked what they should do with their huge holding of dollar reserves. Connally responded that “the dollar is our currency but your problem.” The irony, then and perhaps again now, is that European finance ministers’ concerns about inflation and economic instability were also very much Americans’ problem, too. The 1970s were a macroeconomic disaster in terms of US growth and inflation.
I argue that Americans pat themselves on the back far too much about how wonderfully they have managed the dollar without recognizing the contribution of luck at several critical turns. The dollar might still be number one without this luck, but not with nearly at the same level of dominance, and not necessarily accompanied by the same stability. A shrinking dollar share has profound implications for US interest rates and even national security.
Jeremy Allaire
I want to explore some of these macro and geopolitical factors a bit deeper. There are certainly signs that China and other emerging regional blocs would like to reduce their reliance on the dollar. How do you see this taking shape in the next few years, and what do you think the US should do from a policy standpoint?
Ken Rogoff
By some important measures – the simplest one being foreign central bank reserve holdings – the greenback has already peaked. There are many other measures as well, including share of trade priced in dollars, and the extent to which foreign countries and firms borrow in dollars. Perhaps the best summary indicator is the degree to which foreign central banks stabilize their exchange rates against the dollar, since central banks have very good knowledge of their economies’ links to the dollar, and understand all the reasons they might need to worry about exchange rate volatility.
Figure 1 gives a look at the situation back in 2015 where purple denotes countries whose currencies are stabilized against the dollar, with light purple denoting a looser relationship. Countries stabilizing against the euro (or part of the euro system) are in blue. Except for a few former French colonies in Africa which once pegged to the franc and then switched to the euro, one can see that for all intents and purposes the euro is a regional currency.
Figure 1: The Geography of Anchor Currencies
Data Source: Ilzetski, Reinhart and Rogoff, QJE
Since then, as the book details, the dollar remains king but its grip has significantly loosened. Russia, of course, has effectively been kicked out of the dollar bloc. Far more important, though, is China. The People’s Bank of China still stabilizes the renminbi/dollar exchange rate, but significantly less than it did fifteen years ago. Indeed, having once been a mainstay of the dollar bloc, China’s currency is far more flexible. As a consequence, a number of Asian countries have also had to rebalance their exchange-rate stabilization policies, giving more weight to the renminbi. Considering that Asia constitutes roughly 50% of the dollar bloc, this is a big deal.
Why is all this happening? A major reason, of course, is that the US uses financial sanctions promiscuously, having imposed them on nearly twenty countries as well as an ever-expanding list of foreign individuals and firms. Dollar dominance allows American authorities to control the plumbing of the global financial system, which in turn gives them tremendous access to sensitive information. More and more, modern spying involves monitoring financial transactions. This not only upsets Russia, Iran and China, but also many of the United States’ closest allies. A major appeal of crypto assets is that they are more expensive for governments to audit, even though all transactions remain in perpetuity on the blockchain.
The shrinking footprint of the US dollar is also being driven by the fracturing of global goods and financial markets, which was happening due to geopolitical shifts even before Trump. Perhaps the greatest vulnerabilities come from within, particularly the widespread view in Washington that debt is essentially a free lunch. This belief is deeply intertwined with the “secular stagnation” view that real interest rates can be expected to trend ever lower, with the recent rise being very temporary. The ongoing undermining of US institutions does not inspire confidence, either. Are other countries going to be willing to lend as much into a country where so much decision-making power rests in one person who can change every four years?
“Stablecoins are a complement to the system. In the long run, there is a real chance they will be part of a major transition in the banking and payments system.”
- Dr. Ken Rogoff
Jeremy Allaire
You touch on stablecoins in your new book. It looks like there is a very real chance the US could pass meaningful stablecoin legislation in the near future. Stablecoins help extend the dollar era by making the dollar faster, more efficient, programmable – basically better in every way (though of course we’re biased on this point). Do you see stablecoins as a complement to the existing monetary order, or a challenge to it? And how do you see them shaping the factors you explore in your book?
Ken Rogoff
Fully-backed stablecoins that are pegged to the US dollar, if properly regulated, almost surely enhance dollar dominance rather than challenge it. By contrast, stablecoins linked to the Chinese renminbi, the Swiss franc or the euro, would diminish it. In the long run, stablecoins constitute a new payments infrastructure, and not a new currency. Cryptocurrencies such as Bitcoin are another matter. Although I have long been arguing for far greater regulation, this is not because I believe that Bitcoin has no fundamental value. Quite the opposite, at least under the current regulatory-lite framework. In a world where perhaps 20% of the global economy is underground (mainly tax and regulatory evasion but also including illegal activity), there is huge demand for having new techniques that are both digital and yet expensive for governments to fully trace and identify.
On the other hand, the idea that Bitcoin could replace the dollar is nonsense, as the book explains. The main point is that whereas governments may be slow to react to innovation, this does not mean they never will. Over the thousands of years of currency evolution from coinage to paper currency to banking, the private sector innovates, but eventually the government regulates. Money is not just a “social convention” over which the government has no control, with all due respect to the eloquent but misleading discussion of money in Harari’s Sapiens.
Stablecoins that are linked to a fiat currency are different animals. In general, regulators look far more kindly on such assets, and many view them as a next generation of financial transactions, or at least a leading candidate. As such, they follow many earlier innovations, including checks, credit cards, debit cards, electronic payments and smartphone apps. Some countries may prefer central bank digital currencies to stablecoins, but regulators are rightly wary of command-and-control systems that potentially concentrate cyber risk and stifle innovation.
Of course, given earlier experiences with state and private money, particularly during the free banking era of the 1800s, central banks are probably right to insist on having national currencies be the means of final settlement. Eventually, stablecoin-based intermediaries will need access to the central bank balance sheet to avoid the kinds of runs that have long plagued legacy banking systems. The price of this backing will almost certainly be greater regulation, ideally attuned to the new technology and not just a heavy-handed adoption of the systems used to regulate banks.
Circling back to your question, in the near term, stablecoins are a complement to the system. In the long run, there is a real chance they will be part of a major transition in the banking and payments system. And if that happens, US regulators have a very strong incentive to ensure that a large share of the stablecoin market is dollar-based.
