Trump, Nixon, dollar’s decline: Is global currency shakeup coming?

In a striking Foreign Policy essay, economist Kenneth Rogoff draws a provocative comparison between Richard Nixon’s decision to abandon the gold standard in 1971 and the potential consequences of Donald Trump’s second-term economic agenda.

Just as Nixon’s shock move dismantled the Bretton Woods system and triggered a decade of economic turmoil, Trump’s return to office could catalyse a deep fracture in the global monetary order—this time pushing the dollar closer to the edge of decline in a multipolar currency world.

Rogoff revisits the historical context of the Bretton Woods system, which for decades anchored the global economy by linking major currencies to the US dollar, and the dollar itself to gold. As US inflation began to rise in the late 1960s and gold reserves failed to keep pace with expanding global dollar holdings, confidence in the system eroded.

Nixon’s sudden suspension of gold convertibility in August 1971 marked the beginning of a turbulent decade characterized by high inflation, low growth, and a weakened US currency.

Though his decision was partly a reaction to growing fiscal pressure from the Vietnam War and Lyndon Johnson’s expansive domestic programs, it shocked foreign governments and led to a loss of trust in US monetary policy. 

Rogoff argues that Trump could have a similarly destabilising effect, but under very different circumstances. In his view, Trump’s erratic trade policies, especially his tariff war during his first term, and his second-term proposals—most notably the so-called Mar-a-Lago Accord—risk undermining the very foundation of dollar dominance. The plan, floated by one of Trump’s key advisers, envisions offering zero-interest century bonds to foreign governments, a move that Rogoff describes as tantamount to a sovereign default. Combined with attacks on rule of law, the weakening of US institutions, and hostility to trade and immigration, these policies paint a picture of a global financial system that may no longer see the dollar as its safe anchor.

At the same time, Rogoff points out that the dollar’s supremacy has already been under pressure. China’s efforts to decouple from the dollar began in earnest in 2015 and have accelerated in recent years, with countries in East Asia, Latin America, and Africa increasingly falling into a renminbi-centric trading sphere. The euro bloc continues to offer an alternative for many others, and the rise of cryptocurrencies further chips away at the dollar’s informal dominance—especially in the underground global economy.

What makes the current situation more precarious, Rogoff suggests, is the internal weakness of US fiscal policy. With debt levels now exceeding 120 percent of GDP and both major political parties showing little willingness to rein in spending, the country’s finances are growing dangerously exposed.

Trump has criticised Biden’s deficit spending, but his own projected deficits—over 7 percent of GDP even without a crisis—are no less unsustainable. Rising interest rates could make debt servicing costs balloon, especially if foreign investors begin to retreat from US assets. In that case, America could face yet another inflationary spiral or resort to financial repression to manage its obligations.

Rogoff does not predict the imminent collapse of the dollar. But he warns that the odds of a major monetary crisis in the next four to five years are growing. Just as it took a full decade to stabilise the economy after Nixon’s shock to the system, the fallout from Trump’s second term—if it follows the path Rogoff outlines—could take years to contain. The message is clear: the dollar’s dominance was built on trust, discipline, and international cooperation. Undermining any of those pillars could bring consequences that reach far beyond America’s shores.

By Sabina Mammadli