The Dominant Dollar: My Long-Read Q&A with Steven Kamin
==========
The US dollar is the dominant global currency, supported by the size of the US economy, deep and liquid financial markets, the safety of US dollar treasuries, and the country's rule of law and investor protections. The inertia of international currency markets also contributes to the dollar's dominance. While there are competitors like the euro and the Chinese renminbi, they have not been able to dislodge the dollar. Cryptocurrencies like Bitcoin are too speculative, stable coins are often backed by dollar assets, and China's e-CNY lacks the trust and safety of the US dollar. The dominance of the dollar provides some benefits to the United States, such as seigniorage revenues, lower interest rates on US treasuries, and a current account deficit that allows the US to import more than it exports. However, the overvalued dollar can disadvantage US manufacturing. Devaluing the dollar could be achieved through lower interest rates, foreign exchange intervention, or tariff policies, but these approaches have limitations and potential negative consequences. The biggest threat to the dollar's dominance would be poor fiscal policies, excessive debt, inflation, and erosion of the rule of law in the United States. Dollarization, replacing a national currency with the US dollar, has been considered in countries like Argentina as a way to stabilize their economies.
#UsDollar #GlobalCurrency #Economy #FinancialMarkets #Treasuries #Inertia #Competitors #Cryptocurrencies #StableCoins #Ecny #Benefits #Devaluation #Manufacturing #FiscalPolicies #Dollarization
https://www.aei.org/economics/the-dominant-dollar-my-long-read-qa-with-steven-kamin/
American Enterprise Institute /
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2024-06-04 11:17:20
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2024-06-04 11:17:20Event JSON
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"content": "The Dominant Dollar: My Long-Read Q\u0026A with Steven Kamin\n==========\n\nThe US dollar is the dominant global currency, supported by the size of the US economy, deep and liquid financial markets, the safety of US dollar treasuries, and the country's rule of law and investor protections. The inertia of international currency markets also contributes to the dollar's dominance. While there are competitors like the euro and the Chinese renminbi, they have not been able to dislodge the dollar. Cryptocurrencies like Bitcoin are too speculative, stable coins are often backed by dollar assets, and China's e-CNY lacks the trust and safety of the US dollar. The dominance of the dollar provides some benefits to the United States, such as seigniorage revenues, lower interest rates on US treasuries, and a current account deficit that allows the US to import more than it exports. However, the overvalued dollar can disadvantage US manufacturing. Devaluing the dollar could be achieved through lower interest rates, foreign exchange intervention, or tariff policies, but these approaches have limitations and potential negative consequences. The biggest threat to the dollar's dominance would be poor fiscal policies, excessive debt, inflation, and erosion of the rule of law in the United States. Dollarization, replacing a national currency with the US dollar, has been considered in countries like Argentina as a way to stabilize their economies.\n\n#UsDollar #GlobalCurrency #Economy #FinancialMarkets #Treasuries #Inertia #Competitors #Cryptocurrencies #StableCoins #Ecny #Benefits #Devaluation #Manufacturing #FiscalPolicies #Dollarization\n\nhttps://www.aei.org/economics/the-dominant-dollar-my-long-read-qa-with-steven-kamin/",
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