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The Dollar and the Debt Ceiling by Barry Eichengreen – Project Syndicate


The Dollar and the Debt Ceiling by Barry Eichengreen – Project Syndicate. (FULL ARTICLE)

CommentsView/Create comment on this paragraphBERKELEY – The dollar is the world’s go-to currency. But for how much longer? Will the dollar’s status as the only true global currency be irreparably damaged by the battle in the US Congress over raising the federal government’s debt ceiling? Is the dollar’s “exorbitant privilege” as the world’s main reserve currency truly at risk?

This illustration is by Paul Lachine and comes from <a href="http://www.newsart.com">NewsArt.com</a>, and is the property of the NewsArt organization and of its artist. Reproducing this image is a violation of copyright law.
Illustration by Paul Lachine

CommentsView/Create comment on this paragraphTo be sure, the purveyors of dollar doom and gloom have cried wolf before. When the subprime-mortgage crisis hit, it was widely predicted that the dollar would suffer. In fact, the greenback strengthened as investors seeking a safe haven rushed into US Treasury bonds. A year later, when Lehman Brothers failed, the dollar benefited from the safe-haven effect yet again.

CommentsView/Create comment on this paragraphData from the International Monetary Fund confirm that these shocks caused little (if any) decline in the dominance of the dollar in central banks’ holdings of foreign-currency reserves. Likewise, data gathered by the Bank for International Settlements show that the dollar dominates global foreign-exchange transactions as much as it did in 2007.

Read more at http://www.project-syndicate.org/commentary/on-the-fallout-from-a-us-default-by-barry-eichengreen#848vIks20xEaO6tj.99


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