By Barry Eichengreen
The dependence on American dollars, by banks, corporations, and governments around the world, is a source of strength for the United States. It is, as a critic of U.S. policies once put it, America’s “exorbitant privilege.”
In this top-rated book, Barry Eichengreen traces the rise of the dollar to international prominence over the course of the 20th century. He shows how the greenback dominated internationally in the second half of the century for the same reasons – and in the same way – that the United States dominated the global economy.
But now, with the rise of China, India, Brazil and other emerging economies, America no longer towers over the global economy. It follows, Eichengreen argues, that the dollar will not be as dominant. But this does not mean that the coming changes will necessarily be sudden and dire – or that the dollar is doomed to lose its international status.
Challenging the presumption that there is room for only one true global currency – either the dollar or something else – Eichengreen shows that several currencies have shared this international role over long periods. What was true in the distant past will be true, once again, in the not-too-distant future.
The dollar will lose its international currency status, Eichengreen warns, only if the United States repeats the mistakes that led to the financial crisis and only if it fails to put its fiscal and financial house in order.
The greenback’s fate hinges, in other words, not on the actions of the Chinese government but on economic policy decisions here in the United States.
224 pages. Hardcover. 2011.