The world’s most successful investor, Warren Buffett, said in an interview how long he thinks the dollar will remain the global reserve currency.
How long will the US dollar reign supreme as the global reserve currency? As the BRICS meeting takes place in Johannesburg, South Africa, it is worth asking this question. Back in 2015, the world’s richest investor Warren Buffett predicted how long the greenback is going to last.
Warren Buffett is very good when it comes to predicting. His investment intuitions have been extremely successful: his $116 billion net worth comes almost exclusively from his investment firm Berkshire Hathaway. Buffett’s reputation earned him the nickname “Oracle of Omaha”.
In a 2015 interview with Business Insider, Warren Buffett said the dollar will remain the global reserve currency for at least fifty years. This would place the possible end of dollar supremacy after the year 2065.
The exact way Buffett put it was: “I think the dollar will be the world’s reserve currency 50 years from now. I think the probabilities of that are very high.”
This means Buffett did not think the dollar would cease its role in fifty years, but that in 2065 it would still be the reserve currency.
Buffett went on to say that no other currency appealed to him as a possible dollar substitute. Nevertheless, Buffett recognized the increasingly crucial role of China in the global economy. “I think China and the United States will be the two super-economic powers,” he said, “but I think it’s extremely unlikely that any currency supplants the US dollar as the world reserve currency for many decades, if ever."
Has anything changed?
In 2015, when Warren Buffett made that prediction, China had just passed Japan as the world’s second-largest economy. Its meteoric rise was on every economist’s mind, wondering if it would ever stop.
At the Johannesburg BRICS summit, China is going to assert dominance over other members, calling for the bloc’s expansion. Among the 22 nations applying for BRICS membership, Saudi Arabia is eyed as the most likely to join.
BRICS members, even those opposed to expansion like Brazil, all called for the creation of a common currency to rival the dollar.
A currency achieves global dominance once most of the world’s commodities are traded with it. In particular, the dollar is the main currency used for oil trade.
Saudi Arabia, the world’s largest exporter of oil, and China, the world’s largest importer of oil, are currently in talks to trade with each other using the yuan. This proves that both nations are not completely against trading oil with other currencies.
The inclusion of Saudi Arabia into BRICS might accelerate this process.
On the other hand, no holder of a global reserve currency ever gave up this privilege without losing a major war. The United States will not stand and watch as the BRICS chip away at the dollar’s dominance.
Let’s hope Warren Buffett was right. Any alternative would be much, much bloodier.
