Jim O'Neill does not approve of the U.S. dollar's kingpin status in global markets.
Speaking on CNBC's "Squawk Box Europe," the man who coined the term BRICs for the emerging economies of Brazil, Russia, India, China and South Africa expressed his continued frustration at the longtime economic convention.
"We live in this very peculiar situation where the role of the dollar in global finance is just idiotically more important than the U.S. economy. So, if a strong economy translates directly into a higher dollar, some of these things just sort of follow like night and day," he said.
O'Neill, chair of Chatham House and former chairman of Goldman Sachs Asset Management, was referring to the emerging markets selloff that began last spring as the U.S. dollar gained in strength following interest rate hikes and policy tightening from the Federal Reserve.
In particular, a more robust dollar hurts emerging markets that have taken on significant dollar-denominated debt, as it means that debt is now more expensive to pay off. Since the 2008 financial crisis, the level of dollar-denominated debt in emerging economies' non-banking sectors has doubled.
For those countries dependent on easy foreign capital — like Turkey, among others — O'Neill outlined the already visible consequences: "If this carries on in the U.S., some of those places are going to struggle."
Claudio Borio, head of the monetary and economic department of the Bank of International Settlements, agrees. As a reversal in risk appetite sees liquidity flowing out of emerging markets and into US securities, "a further appreciation of the dollar would exacerbate vulnerabilities in emerging market economies," he said in August.
These vulnerabilities include being more exposed to international capital flows, especially in dollars. With some major exceptions such as India and China, emerging markets also tend to be commodities exporters, and commodity prices generally move inversely to the dollar.
"The kingpin role of U.S. policy and the dollar in world finance is an issue, and the U.S. economy, over (the last) 30 years, has gone to less than 20 percent of world GDP (gross domestic product) and yet the dollar is seemingly playing this dramatic role," O'Neill said.