'Americans Are Not Prepared' Says Harvard Economist About China's De-Dollarization - 'Interest Rates Are Going To Be Higher For A Very, Very Long Time'

The global role of the U.S. dollar is shifting, and the consequences for interest rates and the American economy could be long-lasting.

That's the warning from Kenneth Rogoff, a professor of economics at Harvard University and former chief economist at the International Monetary Fund. In a recent interview with CNBC, Rogoff said the U.S. is entering a new era of fiscal and monetary pressure, driven in part by a long-building move away from the dollar in global markets—particularly in Asia.

"It's going to put pressure on the U.S. budget, interest rates, and Americans are not prepared for any of that," Rogoff said.

The movement, often referred to as de-dollarization, is not new. But Rogoff believes it's accelerating, and could lead to a world where the dollar no longer dominates global trade and financial flows the way it has for decades.

"Asia is half the dollar bloc," Rogoff said. "China… probably should have decoupled significantly from the dollar. It's happening."

According to Rogoff, that shift—coupled with U.S. fiscal strain and political pressure on the Federal Reserve—is likely to keep real interest rates elevated far longer than most Americans or investors are expecting.

"I think real interest rates are going to be higher for a very, very long time," he said. "That era of low interest rates is over."

Check Out:

Wall Street has been quietly buying up equity in owner-occupied homes, and the strategy is kind of genius. Here's how one company is using it to produce 15%+ annual returns for its investors.

A New Economic Reality

The dollar's global standing has long helped the U.S. finance its deficits and maintain low borrowing costs. When foreign central banks hold dollars or buy U.S. Treasury bonds, it supports demand and keeps interest rates in check.

But Rogoff argues that trend is starting to reverse, especially as countries like China reduce their Treasury holdings and shift away from pegging their currencies to the dollar. This is due in part to rising geopolitical tensions and concerns over U.S. sanctions.

That doesn't mean the dollar will be replaced overnight—but it does mean its role could be significantly diminished over the next decade.

"It's not the same thing as replacing the dollar," Rogoff explained. "But it's certainly going to defang it to some extent."

He compared the current moment to the early 1970s, when President Nixon ended the dollar's convertibility to gold, prompting European countries to move away from the U.S. currency.

"We lost Europe. It never came back," Rogoff said. "Where is the dollar bloc now? The center is in Asia, and it may not stay that way."

What's At Stake for Americans

If Rogoff is right, a prolonged period of higher interest rates could impact nearly every corner of the U.S. economy. That includes mortgages, credit card rates, business borrowing, and long-term investment returns.

It's also likely to put renewed strain on the federal budget. As rates rise, so does the cost of servicing the national debt, which has already surpassed 120% of GDP.

Rogoff also raised concerns about the politics surrounding the Federal Reserve. While he praised Fed Chair Jerome Powell's leadership, he cautioned that the institution's independence is not as unshakeable as many believe, especially if it faces growing pressure from the White House or Congress.

"There's a lot Trump can do to put pressure on the Fed," he said, noting that proposed appointments or budget threats could undermine market confidence.

With both structural and political forces pointing toward higher interest rates, Rogoff warned that most Americans are unprepared for the economic consequences, especially if inflation remains persistent or geopolitical tensions intensify.

Don't Miss: See how a $25,000 investment in home equity could outperform stocks in a high-rate economy. Discover the strategy used by institutional investors that's built to thrive in high-rate environments

How Investors Are Responding

Rogoff's outlook suggests it may be time to reevaluate portfolio strategies that were built for a low-rate environment.

Some have turned to inflation-protected assets, real estate, and commodities as ways to preserve purchasing power and hedge against currency risk.

One area gaining attention is home equity, particularly through investment structures that offer exposure to real property appreciation without relying on rental income or interest payments.

The U.S. Home Equity Fund by Homeshares is one such vehicle. It invests in Home Equity Agreements (HEAs), which provide homeowners with cash in exchange for a share of their future home value. It offers accredited investors exposure to real estate appreciation at an accelerated rate with built-in downside protection. The fund's strategy targets a 14%-17% net IRR

Because the contracts are tied to actual home values and span multiple markets across the U.S., they offer a type of asset that may remain resilient even if interest rates stay elevated for years.

See also: This fund gives you access to the $35 trillion home equity market  without buying or managing property. Get the full details on how accredited investors are tapping into America's largest stores of wealth with built-in downside protection.

The Bigger Picture

Rogoff's message isn't apocalyptic. The dollar isn't disappearing, and the U.S. economy still has enormous strengths. But ignoring the shifts underway could be a mistake.

Whether through higher borrowing costs, reduced global leverage or diminished policy flexibility, the effects of de-dollarization are already being felt. And Rogoff says the trend is only gaining momentum.

"Trump has been an accelerant of trends that were already happening," he said. "But the fundamentals were in place no matter who won."

The question now isn't whether the era of low rates is over. It's how to adapt to what comes next.

See Next: The era of low interest rates is over. But this overlooked real estate strategy is just getting started. Explore how the U.S. Home Equity Fund is helping investors hedge against economic uncertainty while targeting 14%–17% net annualized returns.

Image: Shutterstock