The debt deal will do little to delay the day of reckoning for the dollar as the world’s reserve currency. In my book, Eclipse: Living in the Shadow of China’s Economic Dominance, I argued that the renminbi could overtake the dollar as the world’s premier reserve currency sometime during the next decade. My prediction was […]
There are encouraging signs that a breakthrough may have been achieved in the long-running debate over the exchange rate of China’s currency, the renminbi. Its real rate against the dollar is now rising at an annual rate of 10 to 12 percent, which if continued would complete the needed correction of 20 to 30 percent […]
The US Federal Reserve is preparing what could turn out to be one of its greatest follies since its defense of the gold standard during the Great Depression. Ben Bernanke, the Fed chairman, has signaled that next month the central bank could begin the process of printing hundreds of billions of dollars to buy US […]
Pundits and policymakers around the world are wringing their hands over the possibility of further declines in the foreign exchange value of the dollar. Predicting exchange rates is notoriously difficult; there is almost as much chance of the dollar rising next year as of it declining. But if the dollar were to fall further, should […]
The G-20 finance ministers and Central Bank governors met over the weekend in St. Andrews, talking about the data they will need to look at in order to monitor each other’s economic performance and sustain growth (seriously). The underlying idea is that if you talk long enough about the US current account deficit and the […]
Over the past six months, officials and commentators have raised questions about the reserve currency role of the US dollar and the structure of the international monetary system. None of their questions is new; they all date back at least to the break-up of the Bretton Woods system of fixed exchange rates in the early […]
Paul Volcker is always a rewarding read. He is a balanced straight-thinker. With the Internet, the cost of reading Volcker is only the time it takes to read plus the necessary additional effort to think about what he has said. A recent example is Volcker on the economy, the international monetary system, and financial reform […]
On his China visit, Secretary Geithner is immediately on the defensive. The language he is using on the Chinese policy of exchange rate undervaluation-through-intervention is the mildest available. And the commitment he is making, in terms of bringing down the US deficit, which we all favor, is an extraordinary thing to put numbers on in […]
The dollar is depreciating in eye-catching and headline-grabbing fashion. The Japanese authorities are signaling that they are prepared to intervene. The G-7 (remember them?) has the established role of coordinated intervention in major currency markets when things get out of hand. So where are they now and when will they come in?
The financial crisis has been raging for 15 months. One shoe that has yet to drop has been the dollar. Against major currencies the greenback has declined on balance only 4 percent since June 2007 though it dipped 11 percent through April before coming back until recently. The risk is that if the US authorities are not perceived to have their act together, a renewed rapid decline in the dollar will open up a new front in the crisis. At a minimum, it is more than likely that the Bush administration will be defending the dollar before it leaves office on January 20, 2009, and it should be open to doing so.