Economist Nouriel Roubini has warned that the strategic rivals of the United States are preparing to create a “bipolar” global reserve currency system that will move away from the use of USD.

Speaking in a series of interviews, Roubini said that China and Russia are teaming up with allies to create an alternative monetary system to safeguard against US sanctions.

He believes that China will propose the RMB as an alternative to the US dollar and that we will gradually move towards a bipolar global reserve currency system.

The process will not happen overnight, but the outcome will be slower global growth and more expensive production costs. The shift from free trade to secure trade, from offshoring to friend-shoring, and from just-in-time supply chains to just-in-case will all have costly implications.

The US will have less financing of its own twin fiscal and current account deficits, and this can push up the cost of financing for the country, which has high private and public debt ratios.

Roubini also warned that the worst of the severe banking stress in the US is yet to come, and the credit crunch will reduce economic growth significantly. He predicts that the US economy will enter into a recession later this year.