## OUR DOLLAR, YOUR PROBLEM — A Critical Look at Dollar Dominance

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**Canonical URL:** [OUR DOLLAR, YOUR PROBLEM — A Critical Look at Dollar Dominance](https://www.imf.org/-/media/files/publications/fandd/article/2025/06/books-sy.pdf)

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### Background and scope
- Book: Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance, and the Road Ahead
- Author: Kenneth Rogoff
- Publisher details as presented: Yale University Press, New Haven, CT, 2025, 360 pp., $35
- Reviewer: Mouhamadou Sy, senior economist in the IMF’s Monetary and Capital Markets Department
- Contextual timing in source: JUNE 2025

### Historical comparisons and narrative
- Post–World War II dollar dominance is traced across multiple decades and episodes.
- The Soviet ruble “was never a serious competitor to the dollar.”
- The Japanese yen was a potential rival until its sharp appreciation after the 1985 Plaza Accord, which “fueled a bubble in Japan’s stocks and real estate.” By the time Japan recovered from the bursting of the bubble, the US and its dollar had forged ahead.
- The euro is characterized as “the world’s second-leading reserve currency” and is described as “used mostly for trade between European nations.”
- China’s renminbi faces “many obstacles” in its bid to challenge dollar supremacy.

### Mechanisms of dollar dominance and country responses
- Most countries adapt to dollar dominance and often peg their own currencies to it.
- Fixed exchange rates have “contributed to all major crises in emerging markets,” with specific episodes listed: Mexico in 1994, East Asia in 1997, and Argentina in 2002.
- Rogoff’s recommended policy framework—flexible exchange rates, inflation targeting, and independent central banks—is noted as policy advice he helped pioneer “as early as 1995.”
- Several emerging market economies have adopted that triptych alongside “the stockpiling of foreign reserves and strengthening their financial system” as cornerstones of macroeconomic policy.

### Risks, responsibilities, and threats to the dollar
- The dollar confers “exorbitant privilege,” a phrase attributed to Valéry Giscard d’Estaing in the 1960s, meaning the US ability to sell government debt at lower interest rates and “run large current account deficits for decades without threatening its international investment position.”
- Rogoff warns that failing to fulfill responsibilities associated with that privilege—such as “providing dollars to the world economy during times of global stress”—could undermine dollar dominance.
- Additional threats highlighted:
  - Mounting US debt.
  - “An unfounded belief that lower interest rates will last forever.”
  - Complacency about inflation.
  - Challenges to the Federal Reserve’s independence.

### Digital currencies and cryptocurrencies
- The dollar “remains central to the global economy despite the search for alternatives and the recent rise of cryptocurrencies and central bank digital currencies (CBDCs).”
- A digital dollar would “easily eclipse other CBDCs because of the greenback’s status as the leading currency, combined with US technological leadership,” according to the author.
- Rogoff is skeptical of cryptocurrencies’ ability to evade official control; he asserts that “governments have always found ways to regulate private currencies.”

### Policy recommendations and guidance for policymakers
- Endorsement of the policy triad:
  - Flexible exchange rates
  - Inflation targeting
  - Independent central banks
- Continued emphasis on:
  - Stockpiling foreign reserves
  - Strengthening financial systems
- Warning that policy complacency—on inflation, debt, or central bank independence—could erode the benefits of dollar dominance.

### Assessment and contribution
- The reviewer characterizes the book as “a valuable guide for policymakers navigating current global financial challenges.”
- The book “provides a nuanced examination of the geopolitical and economic implications of a dollar-centric world and makes a significant contribution to recent literature on dollar dominance.”

*Source: F&D Book Reviews, JUNE 2025 — review by Mouhamadou Sy*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/06/books-sy.pdf_