# How Much Longer Can the Dollar Be the World's Money? — Notes on MacroVoices #547

> Reflections on the MacroVoices interview with Daniel Lacalle (2026-08-27). It unpacks the three limits that give government debt its credibility, why stablecoins may be the bridge between the old monetary system and the new, and why central banks buy gold but not crypto. Educational notes only — no investment advice, no tickers, no price calls.

Published: 2026-08-28
Locale: en
Tags: reserve currency, US dollar, stablecoins, central banks, gold, macro


![A central bank clearing hall at dawn, a long colonnade receding into depth, cold daylight at the far window, brass scales and ledgers lit by a warm desk lamp in the foreground](/covers/macrovoices-2026-08-27-macrovoices-547-daniel-lacalle-the-future-of-reser-cover.png)

> Things flourish and then decay; when a cycle reaches its extreme it turns. Substance and ornament alternate — this is the way beginnings and endings change.
>
> —— Sima Qian, *Records of the Grand Historian*, "Treatise on the Balanced Standard" (Western Han; my translation)

## What this episode is about

MacroVoices episode 547 (released 2026-08-27, recorded earlier in August). Host Eric Townsend brings back Daniel Lacalle, chief economist at Tressis, for a question that used to belong to cranks and is now a respectable topic: can the US dollar remain the world's reserve currency?

What makes the conversation worth an hour is that neither of them spends much time on "will the dollar collapse." They swap the question out early: instead of asking whether the dollar gets overthrown, ask **what qualifies anything to be the place the world stores its savings — and how does that qualification get spent?**

Lacalle answers with a surprisingly mechanical framework, and midway through, the host drops what I think is the single most valuable inference in the episode. What follows is my synthesis, not a transcript.

## The key points

**1. What we call "money" is mostly government IOUs — and that arrangement is new.**
Lacalle opens by saying most people have never asked what money is. State-issued money corresponds primarily to government debt; central banks around the world hold that debt as a reserve asset, treating sovereign paper as the lowest-risk, first-recourse asset in the financial system. He stresses this is a relatively recent setup — roughly the postwar decades — but because we've lived our entire lives inside it, we assume it has always been so. This is the foundation of everything else: **if it is a historical arrangement, it can be replaced by another one.**

**2. There are three limits on issuing debt, and all three have been breached.**
The economic limit: debt keeps rising, the economy doesn't grow with it, productivity stagnates, and debt outruns GDP. The fiscal limit: more taxes and bigger stimulus packages produce a worse fiscal position, deficits become unsustainable, and interest expense climbs to a dangerous share of the budget — all this *while* central banks hold rates down and buy sovereign paper. The inflationary limit: comprehensively blown in 2020–2021, especially in the economies that had been boasting that money supply and debt could expand without inflationary consequence. Cross all three and, in his words, governments have spent the credibility that let their debt function as a store of value.

**3. "Loss of confidence" is not a mood. It's measurable.**
This was the most useful passage for me. Everyone talks about losing confidence in the dollar or the euro; almost nobody can say what that means. Lacalle's definition is blunt: **holding the long-term debt of these countries has been generating losses in real terms, and sometimes in nominal terms.** You lose confidence in the instrument first, and only then in the currency. The order matters.

**4. Central bank digital currencies and cryptocurrencies are not variations on a theme — they point in opposite directions.**
A cryptocurrency, as he frames it, is fully decentralised, can't be confiscated, and is detached from the state-issues-money architecture. A central bank digital currency puts your account inside the central bank — what you consume, invest, spend and owe becomes visible to it. He names the European Central Bank as panicking: the euro has already lost second place among central bank reserve assets to gold, and the response is an attempt to impose usage by digital means. The United States is running the opposite play — banning central bank digital currencies, embracing stablecoins and crypto, aiming to make itself the global capital of crypto assets, on the logic that behind every stablecoin stands a dollar. His sharpest line: the current US administration sees central bank digital currencies as **surveillance disguised as money**.

**5. Stablecoins may be the bridge from the old system to the new — and this is the host's inference, not the guest's.**
Ask any thoughtful person why the dollar is still the reserve currency and you get one answer: there is no alternative, because no market on earth has the depth and liquidity of the US Treasury market for absorbing central-bank-sized flows. Townsend then says: hang on. If transactions increasingly move into stablecoins, and those stablecoins are backed by Treasuries, **you have just rebuilt the system so that it sits one programmer's epiphany away from a viable replacement.** Everyone is transacting in stablecoins; one day you change what backs them, and the transition is done without anyone changing their habits. Lacalle agrees, and adds the better half of the thought: precisely because that bridge exists, it forces the US government and the Federal Reserve toward prudence. The only way to keep the dollar is to put the currency's purchasing power first, instead of using the currency to disguise fiscal imbalances.

**6. Central banks are buying gold, not crypto — and the reason is practical.**
If the direction of travel is digital, reserves should be going digital. They're going into gold. Lacalle's explanation: gold does not threaten their own currency; crypto does. **What they want to escape is dollar-centricity, not centralisation.** They shed dollars and euros while clinging to the power to issue money — you cannot bake the cake and eat it. He extends the same logic to the BRICS currency idea: that isn't a step toward the future but a step back into the past, toward capital controls, currency controls and non-independent institutions. Along the way he punctures a common misreading: the dollar is the reserve currency **not because it is good, but because the alternatives are worse** — and what actually holds it up is independent institutions, open capital markets, and the absence of capital and currency controls.

## Going further

### 1. "I don't trade currencies. What does dollar hegemony have to do with my portfolio?"

That's the honest reaction most people have to the phrase "reserve currency." It sounds several hundred miles from anything you own.

Take it apart and it's closer than it looks. Any stock you hold is future cash flows discounted back to today. The discount rate is anchored to long-term government yields; the cash flows are denominated in some currency. What this episode is really describing is **that anchor coming loose** — when real returns on long-dated debt are persistently negative, you are measuring the length of everything you own with a ruler that shrinks a little each year.

So the practical takeaway isn't what to buy. It's a different dashboard: instead of chasing the "will they cut rates" headline, watch the thing Lacalle made measurable — **whether holders of long-term debt, after inflation, have made money or lost it over recent years.** It's a slow variable; checking quarterly is plenty. But it tells you more about the health of the system you're priced in than ten headlines will.

One layer down, this also explains a nagging experience: markets making nominal highs while nobody feels richer. You're earning the numerator while the denominator quietly moves. That isn't conspiracy — it's the everyday version of the third limit.

### 2. "I've heard 'the system is ending' for ten years and it hasn't ended. Am I supposed to do something?"

The bigger risk in listening to material like this isn't being persuaded. It's being persuaded and then **acting on the wrong time horizon** — making a three-month trade against a ten-year structural problem.

The episode contains the antidote without stating it. Lacalle talks about **conditions**, never about **timing**: three limits breached is a statement that the conditions are in place. Asked how it actually plays out, he says plainly that it's very hard to see how it will happen. Keep those two things in separate drawers, because a deterioration with no available substitute produces no price reaction at all. That's exactly why the host's inference matters: he isn't saying when it breaks, he's pointing out that **the replacement path is being paved**. A finished bridge is not the same as traffic on it.

In practice, write it down as trackable conditions rather than a conclusion. This episode supports at least three that could genuinely prove you wrong: whether the collateral structure behind stablecoins starts to change, whether the ordering of central bank reserve assets shifts again, and whether interest expense as a share of budgets stops rising. If any of them moves the other way, the whole narrative deserves a downgrade. **A view that can be overturned is a view; one that can't is a posture.**

### 3. "So should I go buy gold or bitcoin?"

There's a trap buried nicely in this episode. Central banks are buying gold — that's a fact. But the motive Lacalle exposes is that gold doesn't threaten their monopoly on issuance. Which means **their reason for buying gold may be the opposite of a private individual's reason.** They want out of the dollar while staying inside centralisation. If you're buying because you distrust centralisation, you're on the same side of a position as people whose goal contradicts yours.

That doesn't make it wrong. It makes it worth saying out loud: **when you observe a large buyer, you learn their behaviour, not their reasoning.** That habit transfers directly to equities. Institutions are buying — fine, that's all you know. Unless you can articulate *why* they're buying, you're borrowing an argument you don't understand.

What the episode does support is the Hayek thread. Lacalle points to the short book Hayek wrote before the internet and long before bitcoin, arguing that **competition between currencies ends the perverse incentive issuers have around inflation** — governments benefit from inflation because it dilutes commitments they made in a currency they themselves issue. Introduce competition and the issuer has to present itself as the better option. Hence his counter-intuitive conclusion: **citizens who go on using state money benefit too**, because the state's room to expand its imbalances shrinks. That's a judgement about where discipline comes from, not a judgement about price. And I liked his closing observation: every monetary revolution has happened because citizens embraced it first — governments, empires, central banks, "all the same thing," he says — were always the last to understand it.

## Where to look next

- MacroVoices #547 (2026-08-27), Eric Townsend interviewing Daniel Lacalle — listen via the show's own channels
- Hayek, *Choice in Currency* (1976) — the short book referenced in the episode, on how currency competition disciplines issuers
- Daniel Lacalle's English-language books (*Escape from the Central Bank Trap* and others), plus his forthcoming book on the new global economic order
- IMF COFER: the currency composition of official reserves, useful for checking claims like "the euro lost second place to gold"
- World Gold Council central bank demand reports: how much gold central banks are actually buying
- US Treasury and FRED data on federal interest expense: whether the fiscal limit is still deteriorating

## The one thing to take away

**Trust isn't a feeling. It's measurable — and the measurement is whether the people who have held the thing longest are up or down.**

That's the portable idea. Lacalle takes "loss of confidence," which sounds like sentiment, and converts it into an arithmetic anyone can check. The conversion works far beyond currencies.

**This week's exercise:** pick one thing you assume will simply always be there. It needn't be an investment — a job, a ten-year relationship, a habit you assume won't break, a service you depend on daily. Write one sentence: "If this were failing, what is the earliest sign?" Make it specific enough to check — not "it feels distant," but "three weeks with nobody reaching out first," or "the number of evenings this month I didn't want to talk after work." Then **go check that one thing's current state today.**

Most things don't collapse suddenly. They lose the qualification to be trusted long before they lose the position of being used. The only difference is whether someone looked at the number early.