The dollar’s prolonged swoon throughout much of 2009, coming at the end of a near ten-year slide, has sent currency analysts, financial officials, and politicians of all stripes into a hand-wringing melancholy regarding the greenback’s long-term prognosis. Of course, many ignore the fact that the world fled to the dollar during the financial crisis as a safe harbor from the stormy seas of financial and economic chaos.
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The debate over the exchange rate between the renminbi (RMB) and the dollar is usually framed in terms of global imbalances: excessive US consumption beyond its savings on the one hand and excessive Chinese production and savings beyond its own spending on the other. This quickly leads to the view that the United States should export and save more and China import and spend more.
- Comment [4]
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The international currency of choice, the dollar, is under the control of a single country, a worrisome arrangement. Even worse, this country has been running huge external deficits for more than a decade and is now the world’s single largest debtor.
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In March 2009, Chinese central bank Governor Zhou Xiaochuan caused a brief stir in the currency markets by suggesting that a dollar-based international monetary system was inherently unsustainable. “Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries’ demand for reserve currencies,” he wrote.
- Comment [6]
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On the threshold of the new decade, it seems fitting to take a long-term view. There are a plethora of issues that crystal-ball gazers could usefully contemplate.
- Comment [2]
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There is a ticking time bomb under the dollar. It could explode at any time.
- Comment [4]
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Exchange rate movements over the past year have had a substantial impact on the competitiveness of countries and of companies. Increased exchange rate volatility and uncertainty about future movements are also complicating company investment decisions.
- Comment [11]
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Since 1997 we’ve seen three global financial earthquakes, with the current one being the biggest and most violent. Unfortunately, there’s no reason to believe we’ve come to the end of the string.
- Comment [12]
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The outbreak of the global financial crisis was preceded by an extended period of persistent financial imbalances. These imbalances stemmed from the symbiotic relationship between the US, with its huge current account deficits, and China (as well as some other countries) that had equally persistent trade surpluses and which financed the US deficits with large capital inflows.
- Comment [6]
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Paradoxically, one can have greater confidence in the long-run prospects for a currency than in its short-run prospects. This is because the relationship between long-run fundamentals and long-run value is stronger than in the corresponding short-run case.
- Comment [6]
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Just as we continue to analyze the causes and consequences of the 1929 stock market crash, historians will be assessing and reassessing the global credit crisis that began in 2008 and the Great Recession that followed. As they do, my guess is that the behavior of financial institutions and the post-crisis banking reforms will prove to be far less significant than two far-reaching structural changes in the global economy.
- Comment [8]
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Exchange rates and international capital flows have played only a minor role in the saga of the global financial crisis so far. For the United States and the United Kingdom, the essence was an old-fashioned domestic financial crisis.
- Comment [2]
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The world is in the midst of a crisis and so is the US dollar. Having served as the world’s reserve currency for nearly 100 years, is its long-standing predominance now coming to an end? The dollar has been depreciating versus the euro and the yen for quite some time now, raising doubts about its stability.
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31 Jan 2010 · 12:35:34 PM GMT
My name is John Nugée, and I work for State Street Global Advisors, an asset management firm, where I have a role which that includes inter alia commenting on the global financial architecture. Consequently your paper on reserve currencies is of gre...—John Nugee
In response to Costs and benefits of issuing a reserve currency
29 Jan 2010 · 04:44:38 PM GMT
A major economic problem in America is the growing disparity in wealth. Trends like Wal-Mart, Google and Amazon are concentrating more resources into fewer hands. The recent near collapse of our consumer-led economy was caused by globalism and the ...—Blight
In response to Get ready for a new economic era
28 Jan 2010 · 02:17:45 PM GMT
There’s one key leverage point that can give us a solution to this problem and many others: improve the accounting system to take include externalized costs. Solve that problem, then people will be faced with the real costs of what they do, an...—Bryan Butler
In response to Time to end the multigenerational Ponzi scheme
27 Jan 2010 · 10:53:46 PM GMT
Here are three reasons why dollar would continue to remain one of the leading currencies for a long time to come. 1. In a world of limited alternatives, USD has the best chance. Do you want to own Yuan as part of your central bank currency reserve ...—SureshR