Reserve currencies face a credibility test beyond government debt

The brief

Daniel Lacalle joins Erik Townsend and Patrick Ceresna to question whether sovereign debt can remain the foundation of money when fiscal and inflationary limits weaken its credibility.

A reserve currency must offer stability, liquidity, and returns above inflation, but the discussion asks whether those qualities require government issuance at all.

Stablecoins emerge as a bridge between dollar-based finance and a more decentralized system, while deep, liquid U.S. Treasury markets keep the dollar central.

CBDCs could digitize money without loosening central control, raising privacy concerns as governments confront cryptocurrencies and hard-to-regulate stablecoin networks.

The episode’s wider question is whether political disruption and trade policy accelerate a pluralistic monetary order—or reinforce central banks’ control over money.