Has Lagarde meant to arouse doubts about Euro, US dollar?

ECB’s Christine Lagarde, has cautioned that the United States and the Eurozone should never take the status of their currencies as reserve currency for granted because nations like China and Russia are working to develop their own financial systems.

The eighty-year dominance of the dollar as the world’s reserve currency has drawn criticism due to China’s economic expansion, mounting debt, and geopolitical challenges to Western hegemony. The head of the European Central Bank, Christine Lagarde, envisions a new world order in which countries develop their own payment systems, buy gold, or investigate other monetary systems.

Given that they account for more than 60% of the world’s foreign exchange reserves and debt, she does not, however, think that the US dollar and the euro are going to lose their hegemony. The Bretton Woods pact, which was signed in 1944, is credited with establishing the dollar as the world’s reserve currency.

The world may soon enter a “new age” in which historical regularities may no longer serve as a reliable indicator of how the economy functions, according to Lagarde, who warned that the underlying assumptions that have long underpinned the technocratic management of the global order were crumbling.

For decision-makers with a mandate for stability, this presents a substantial difficulty. Lagarde has been vocal about the future of the globalised, free-market system that she helped to establish, as well as the primacy of the dollar. She was the first prominent Western central banker to publicly express worries in April about the vulnerability of the dollar, whose supremacy she said “should no longer be taken for granted.”

The leader of the revered monetary authority’s communications department rarely speaks on topics other than balance sheet policy and deposit rate changes, so this warning was viewed as odd coming from him. It is difficult to avoid wondering if Lagarde, who has spent her whole career steering the global establishment through crises, has recognised a possible extinction event and is once again arguing that she should be the one to assist in preventing it.


Significant changes will occur in commerce and investment. Analysts have questioned if Lagarde is aware of information that we are unaware of. Lagarde is renowned for her charm, talent, and capacity to stay alive by latching onto history’s pulse. She is very likely to sincerely believe that things are becoming worse and that the globalised system she helped create and that, in turn, helped create her, is collapsing. Effective monetary policy necessitates the synthesis of vast quantities of data, and Lagarde is trained to inhale vast galaxies of it, spending much of her waking hours poring through dense briefing material.

Lagarde has learned that predictions made by powerful central bankers have a chance of coming true. As inflation surges, the public is becoming more aware of the bank’s activities and messages, which makes the economy more responsive to Lagarde’s influence. This presents an advantageous window of time for spreading crucial messages.

Lagarde will be in a strong position to win if Armageddon is averted. She feels embarrassed by the sudden surge in inflation, so she feels the need to underline the risks as a form of damage management. If ECB policy fails to successfully lead Europe through the global economy’s fragmentation, Lagarde can fairly easily respond, “Well, sorry, but she always warned it might.”