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The Book of the Week is “Exorbitant Privilege, The Rise and Fall of the Dollar and the Future of the International Monetary System” by Barry Eichengreen, published in 2011.
“Often these individuals had little professional training, there being no meaningful federal or in some cases, even state licensing requirements.”
No, the above refers to neither tax preparers nor life coaches.
The author was referring to the bandwagon-jumpers who worked for lenders taking advantage of the excessive deregulation that resulted in the 2008 subprime mortgage crisis in America.
The author listed some factors favoring, and some disfavoring the American dollar’s ability to maintain its global power as a currency and store of value. However, one major factor the author completely neglected to mention (a glaring omission) was that of cryptocurrencies.
Anyway, Brooksley Born, head of the Commodities Futures Trading Commission, raised the alarm in the late 1990’s on the excessive deregulation that was to lead to the subprime crisis. She deserves more of a historical footnote than she has since received, because sadly, greedy alpha males are better propagandists than prescient, conscientious public-officials such as she.
The author contended that one major reason the American dollar will continue to maintain its dominance in the world, is that other industrialized nations can’t agree on what financial instrument should replace the American dollar as a stabilizer of the world’s other currencies. The greenback has compiled a longer history of trustworthiness, value-consistency, related liquidity-maintenance, and other benefits, in connection with transactions and international trade balances, more than any other instrument. China’s policy of keeping its central banks’ foreign-reserves balance a secret, reduces China’s currency’s trustworthiness.
The powerful U.S. government backs up its currency through treasury bonds and bills, while a (sometimes contentious) collective of European countries (not one government) must agree on how to act when a monetary crisis rears its ugly head. It stands to reason that disagreement or indecision leads to uncertainty, which leads to instability, and a possible worsening or hastening of, the collapse of modern civilization.
The aforementioned are just a few reasons why 54 countries pegged their currency’s values to the American dollar, while 27 pegged theirs to the euro, as of 2009. As is well known, the George W. Bush administration did a number on the U.S. economy, as “… tax cuts and unfunded spending increases [on two extremely expensive wars and a Medicare drug benefit] pushed the budget from surplus in 2000 to a structural deficit of 4 percent of GDP in 2007-2008.” The next two years saw the American government’s debt explosion at its worst.
The author outlined several possible (yet raucously controversial) ways to keep the American dollar globally powerful, through cost-cutting:
- In a period of non-war– less defense-spending;
- Reforming healthcare;
- Raising the retirement age– less pension spending;
- Liberalizing immigration policy — helps fund Social Security going forward; and
- Increasing taxes of all kinds.
Read the book to learn a lot more about how the American dollar has fallen in stature in recent decades, and about other geopolitical international: monetary, financial and economic issues; explained for laypeople.