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- Warren Buffett isn't at all concerned about de-dollarization, based on his comments in recent years.
- The famed investor expects the dollar to remain the world's reserve currency for decades to come.
- However, he's warned against printing too much money and eroding the currency's value.
The US dollar's status as the world's reserve currency, and the dominant medium of global trade and investment, is in danger, several experts say. Warren Buffett isn't worried about so-called de-dollarization, based on his bullish comments about the buck over the past decade.
"We are the reserve currency, I see no option for any other currency to be the reserve currency," the billionaire investor and Berkshire Hathaway CEO said during his company's annual shareholder meeting in May.
He was referring to many countries holding large amounts of dollar reserves. Governments around the world consider the greenback to be a safe and stable store of value, which they can rely on to conduct international commerce.
Buffett was even more emphatic during the Berkshire meeting in 2015. He predicted the world would still be deeply reliant on the buck in 2065.
"I think the dollar will be the world's reserve currency 50 years from now, and I think the probabilities of that are very high," he said. "Nothing certain, but I would bet a lot of money on that one."
The famed stockpicker even suggested, during his company's gathering in 2013, that the dollar might retain its princely perch forever.
"I think China and the United States will be the two super economic powers, but I don't see any — I think it's extremely unlikely — that any currency supplants the US dollar as the world reserve currency for many decades, if ever," he said.
Charlie Munger, Buffett's business partner and Berkshire's vice-chairman, chimed in with a similar call.
"Oh, I think it'll still be the reserve currency of the world 20 years from now," Munger said. "That doesn't mean that it's forever," he noted, adding that even if the dollar ceases to be the world's reserve currency, that wouldn't be a big deal.
Clearly, Buffett and Munger expect the dollar to remain in vogue for decades to come. But they've repeatedly warned the US government against weakening the greenback, and Americans' purchasing power, by flooding the economy with money.
"We should be very careful," Buffett said at this year's meeting. "Nobody knows how far you can go with a paper currency before it gets out of control, particularly if you're the world's reserve currency."
Munger struck a similar tone during the 2015 meeting. I'm probably more nervous than a lot of people about printing a lot of money and spending it," he said. "I think it's always more dangerous than the economic profession thinks."
Indeed, the US Dollar Index — which tracks the dollar against a basket of foreign currencies — has slumped by 6% in the past year alone. The decline is largely the product of inflation plunging from over 9% to 3% in the last year. That has raised expectations that the Federal Reserve will reverse course and cut interest rates soon, eroding the dollar's appeal to savers.
However, experts have also blamed the historic amount of government spending during the pandemic. They argue it has fueled inflation and increased money supply, which has eroded the dollar's purchasing power and diluted its value.
Buffett and Munger might be right on that count, and if they're correct about the greenback's global status too, investors fearful of de-dollarization can breathe a sigh of relief.