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Policy recommendation and conclusion
1. Sanctions and other coercive financial instruments should be applied selectively and strategically.
2. Structural reforms are often necessary.
Today, the global monetary system rests mainly on a singular currency, thanks to the Dollar’s credibility, trustworthiness and depth of the financial system underpinning it. However, the global payments system is evolving towards a multipolar system, due to emerging powers and political disputes, such as the Ukraine-Russia conflict. The USD’s dominance will not be questioned in the short-term, however, as time passes, the weight of the dollar in global finance could degrade in the coming decades. Some important players such as China are already trying to carve out more space, and other potential rivals may follow - the EU being one.
Gold, despite being a thousand year old commodity that has been cherished by Egypt’s pharaohs, is still an important asset to protect a currency’s stability. Cryptocurrency, which has had a strong acceptance in the last few years, is not yet playing a crucial role in global finance (with some very niche carveouts).
A currency being simply an intermediary for transactions is still one of the fundamentals of a country’s economy. Distortions in it over a long period of time, such as in the case of the Yen in Japan, can harm a country’s economic growth potential.
The architecture of global finance is undergoing a slow but structural transformation, and the decisions taken by major powers over the coming decades on sanctions, trade, financial markets, liberalization, digital infrastructure, and monetary coordination will determine whether this transition leads to a more balanced and resilient system, or to one defined by fragmentation and strategic rivalry.
Yours Sincerely,
Donát Oláh
EPIS Think Tank Report Groups
Resort leader
Editor of the EPIS International Economic Relations Report