Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System
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Recent events in the US--high unemployment, record federal deficits, and unprecedented financial distress--have raised serious doubts about the future of the dollar. So profound has been the impact that some say the dollar may soon cease to be the world's standard currency. Is the situation that bad? In Exorbitant Privilege, one of our foremost experts on the international financial system argues that while the dollar is bound to lose its singular status to newcomers like the Euro and the Chinese Renminbi, the coming changes will be neither sudden nor dire. Barry Eichengreen puts today's crisis in historical context, revealing that only after World War II, with Europe and Japan in ruins, did the dollar become the world's monetary lingua franca--the reserve currency of the world's banks and the kind of cash accepted virtually everywhere. Now, with the rise of China, India, Brazil and other emerging economies, America no longer towers over the global economy like before. And the U.S. itself faces very serious economic and financial challenges as it contemplates its medium-term future. But despite this, Eichengreen concludes, predictions of the dollar's demise are greatly exaggerated. The paperback edition features a new afterword that takes the story up through 2012.
World War I, 26, 33, 42, 69, 196 World War II, 7, 39, 42, 45, 47, 55, 70, 89, 93, 121, 133, 134, 157, 177, 192 yen, 44, 45, 67, 68, 127, 139, 144 Zhou, Xiaochuan, 137, 142–143
get his money immediately rather than having to wait for the goods to arrive in the foreign market and for the buyer’s payment to arrive in the United States. The papers in question are known as “trade acceptances.” In purchasing them at a discount from their face value, a bank is said to “discount” them. But having to rely on London for trade credit, as U.S. importers and exporters did, made the process positively labyrinthine. Picture the requirements facing a New York coffee roaster importing
boost their levels of education. The gap is closing. And for those who go straight from secondary school to work, the United States lacks effective vocational training like that which exists in Europe. Nor can the United States count on high levels of private investment. The additional public debt inherited from the financial crisis will have to be serviced. Servicing it will mean higher taxes. Ensuring that new bonds are willingly taken up when existing bonds mature will require higher interest
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bank. The bill to recharter was defeated. State banks were thus freed of discipline on their note-issuing activities. The next years saw a massive lending boom fueled by a flood of state banknotes, leading first to inflation and then, inevitably, to a crash. In 1816 this unhappy experience caused the Congress to reverse itself and charter a second Bank of the United States, again with a head office in Philadelphia and again for 20 years. The policies of the Second Bank attracted little notice