Death Cometh for the Greenback

Joseph Stiglitz, a leading global economist, argues that the US dollar has a limited future as the world’s dominant currency. But such a change to a system that has long relied on the US dollar as the global reserve currency is not to be feared: it will benefit both the US and the world. The current system is unstable, weakens the global economy, and works to the disadvantage of all countries. Countries that hold their assets in U.S. government bonds are suffering an opportunity cost of investing in lower yield instruments. Meanwhile, the US is racking up a huge trade deficit as other countries hold onto dollars. What’s needed is a single reserve currency for the world modeled on the IMF’s Special Drawing Rights. Such a system would be more stable and encourage countries to invest their reserves rather than holding onto them, aiding global growth. The transition would be difficult, but, as the current system is already fraying, the need to move away from a dollar-dominated world is all the more pressing. − YaleGlobal