{
  "title": "The Dollar’s Primacy",
  "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2022/03/book-review-dollar-primacy-joyce",
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  "summary": "The Global Currency Power of the US Dollar: Problems and Prospects",
  "sections": [
    {
      "heading": "Background and context",
      "content": "- When the COVID-19 pandemic triggered a “risk-off” flight of capital in the spring of 2020, private investors and financial institutions turned to US Treasury bonds as the alternative “safe asset.”\n- The retreat from financial markets was soon reversed, in part because of the Federal Reserve’s formidable response to the threat of a global financial collapse.\n- Fifty years after President Richard Nixon cut the link between gold and the dollar reserves held by foreign central banks, the US dollar continues to play a predominant role in the global financial system, with enormous spillover effects for US monetary policy.\n- Author and reviewer: JOSEPH P. JOYCE, professor of economics, Wellesley College; review of Anthony Elson’s The Global Currency Power of the US Dollar: Problems and Prospects."
    },
    {
      "heading": "Reasons for the dollar’s predominance",
      "content": "- Historical roots: emergence of the United States as the world’s largest economy after World War II.\n- Market structure: US financial markets are unequaled in terms of breadth and liquidity, which reinforces the use of the dollar in financial transactions.\n- Network effect: the widespread usage of the dollar provides an incentive for new users also to adopt it."
    },
    {
      "heading": "Benefits of a dollar-based system",
      "content": "- US international traders and investors avoid the cost of foreign exchange transactions and exchange rate risk.\n- The US government can continue to run fiscal deficits with low interest rates because of the demand for US securities.\n- The cutoff of access to the dollar-based global banking network through sanctions serves as a valuable foreign policy tool."
    },
    {
      "heading": "Vulnerabilities and risks",
      "content": "- Dependence on fiscal deficits to supply safe assets to the world creates a “new Triffin dilemma.”\n- Raises the question of whether there is a threshold of debt that would trigger concerns about the sustainability of the US debt.\n- These concerns may become manifest if interest rates rise in 2022 as the Federal Reserve responds to inflation.\n- Any increases in US interest rates will raise the cost to foreign governments of refinancing their external debt."
    },
    {
      "heading": "Potential alternatives and their constraints",
      "content": "- Multiple reserve currency system:\n  - A system including the euro and the Chinese yuan could have advantages over the existing dollar-based system.\n  - A number of conditions must be met before those currencies gain more acceptance, and the pace of adaptation and change is expected to be slow.\n- Expanded use of the IMF’s Special Drawing Rights:\n  - Depends on reforms in the IMF’s operations and its voting structure, which must be negotiated.\n- Digital currencies:\n  - Central banks are actively exploring the use of electronic means of payment.\n  - If a system of payments for international transactions emerges that is seen as safe, stable, and not dependent on any one country, then the dollar’s central role may be replaced by a different form of money altogether.\n\nOverview based on The Global Currency Power of the US Dollar: Problems and Prospects, reviewed in F&D Magazine by JOSEPH P. JOYCE.\n\n---\n\n Content in this bundle\n\n- استعراض الكتب\n  - استعراض الكتب (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - استعراض الكتب (PDF){rel=\"external\" type=\"application/pdf\"}\n- La suprématie du dollar\n  - La suprématie du dollar (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - La suprématie du dollar (PDF){rel=\"external\" type=\"application/pdf\"}\n- The Dollar's Primacy\n  - The Dollar's Primacy (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - The Dollar's Primacy (PDF){rel=\"external\" type=\"application/pdf\"}\n- Книжное обозрение – Финансы и развитие – Переосмысление бюджетных основ – март 2022 года\n  - Книжное обозрение – Финансы и развитие – Переосмысление бюджетных основ – март 2022 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Книжное обозрение – Финансы и развитие – Переосмысление бюджетных основ – март 2022 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- La primacía del dólar ● Finanzas y Desarrollo ● Marzo de 2022\n  - La primacía del dólar ● Finanzas y Desarrollo ● Marzo de 2022 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - La primacía del dólar ● Finanzas y Desarrollo ● Marzo de 2022 (PDF){rel=\"external\" type=\"application/pdf\"}\n- 美元的主导地位\n  - 美元的主导地位 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 美元的主导地位 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2022/03/book-review-dollar-primacy-joyce"
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    "Authors: JOSEPH JOYCE",
    "Published: March 1, 2022",
    "When the COVID-19 pandemic triggered a “risk-off” flight of capital in the spring of 2020, private investors and financial institutions turned to US Treasury bonds as the alternative “safe asset.”",
    "The retreat from financial markets was soon reversed, in part because of the Federal Reserve’s formidable response to the threat of a global financial collapse.",
    "Fifty years after President Richard Nixon cut the link between gold and the dollar reserves held by foreign central banks, the US dollar continues to play a predominant role in the global financial system, with enormous spillover effects for US monetary policy.",
    "Author and reviewer: JOSEPH P. JOYCE, professor of economics, Wellesley College; review of Anthony Elson’s The Global Currency Power of the US Dollar: Problems and Prospects.",
    "Historical roots: emergence of the United States as the world’s largest economy after World War II.",
    "Market structure: US financial markets are unequaled in terms of breadth and liquidity, which reinforces the use of the dollar in financial transactions.",
    "Network effect: the widespread usage of the dollar provides an incentive for new users also to adopt it.",
    "US international traders and investors avoid the cost of foreign exchange transactions and exchange rate risk.",
    "The US government can continue to run fiscal deficits with low interest rates because of the demand for US securities.",
    "The cutoff of access to the dollar-based global banking network through sanctions serves as a valuable foreign policy tool.",
    "Dependence on fiscal deficits to supply safe assets to the world creates a “new Triffin dilemma.”",
    "Raises the question of whether there is a threshold of debt that would trigger concerns about the sustainability of the US debt.",
    "These concerns may become manifest if interest rates rise in 2022 as the Federal Reserve responds to inflation.",
    "Any increases in US interest rates will raise the cost to foreign governments of refinancing their external debt.",
    "Multiple reserve currency system:",
    "Expanded use of the IMF’s Special Drawing Rights:",
    "Digital currencies:",
    "**استعراض الكتب**",
    "**La suprématie du dollar**",
    "**The Dollar's Primacy**",
    "**Книжное обозрение – Финансы и развитие – Переосмысление бюджетных основ – март 2022 года**",
    "**La primacía del dólar ● Finanzas y Desarrollo ● Marzo de 2022**",
    "**美元的主导地位**"
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