Every few years, we hear predictions of the imminent demise of the US$ as the world's anchor currency. Here is my paper from 2011 on this issue and why anchor currencies are far more resilient than generally believed:
fullertreacymoney.com/system/data/im…
fullertreacymoney.com/system/data/im…
The first thing to understand about a world currency is that it is an IOU & easiest way to generate enough IOUs for the world is for a large economy to run large current account deficits. This is why currencies from a surplus country will rarely become world currencies 2/n
The risk is that the issuing country will generate too much currency and lose its credibility, but if it doesn't print enough it tightens global monetary conditions (known as Triffin's dilemma).Very few countries can run persistent deficits and still maintain some credibility 3/n
For the foreseeable future, only the US is capable of doing this role. Hence the US$ cannot be easily replaced. This is its "exorbitant privilege". Anyone who argues otherwise needs to read the long history of world currencies (see my 2011 article above) 4/n
