This book explains how the US dollar serves as the primary reserve currency for the international financial system and assesses its prospects for the future. The book provides an analysis of the main factors that have given rise to the global currency power of the dollar and the key benefits that have accrued to both the United States and other countries from this arrangement. It then considers the growing costs that can be associated with the dollar-centered reserve system and the prospects for the medium-term in terms of its potential threats to global financial stability. In the light of these considerations, the book examines three alternative currency arrangements that could address some or all of the defects associated with the global currency power of the dollar. These include a shift to a multi-reserve currency system, an enhancement of the IMF’s role as an international lender of last resort and provider of global “safe” assets, and the introduction of central bank digital currencies. "A cogent, persuasive and timely look at the dollar's power." Kirkus Reviews

A powerful new understanding of global currency trends, including the rise of the Chinese yuan At first glance, the history of the modern global economy seems to support the long-held view that the currency of the world’s leading power invariably dominates international trade and finance. But in How Global Currencies Work, three noted economists overturn this conventional wisdom. Offering a new history of global finance over the past two centuries and marshaling extensive new data to test current theories of how global currencies work, the authors show that several national monies can share international currency status—and that their importance can change rapidly. They demonstrate how changes in technology and international trade and finance have reshaped the landscape of international currencies so that several international financial standards can coexist. In fact, they show that multiple international and reserve currencies have coexisted in the past—upending the traditional view of the British pound’s dominance before 1945 and the U.S. dollar’s postwar dominance. Looking forward, the book tackles the implications of this new framework for major questions facing the future of the international monetary system, including how increased currency competition might affect global financial stability.

Why the dollar will remain the world's most powerful currency Monetary rivalry is a fact of life in the world economy. Intense competition between international currencies like the US dollar, Europe's euro, and the Chinese yuan is profoundly political, going to the heart of the global balance of power. But what exactly is the relationship between currency and power, and what does it portend for the geopolitical standing of the United States, Europe, and China? Popular opinion holds that the days of the dollar, long the world’s dominant currency, are numbered. By contrast, Currency Power argues that the current monetary rivalry still greatly favors America’s greenback. Benjamin Cohen shows why neither the euro nor the yuan will supplant the dollar at the top of the global currency hierarchy. Cohen presents an innovative analysis of currency power and emphasizes the importance of separating out the various roles that international money might have. After systematically exploring the links between currency internationalization and state power, Cohen turns to the state of play among today’s top currencies. The greenback, he contends, is the "indispensable currency"—the one that the world can’t do without. Only the dollar is backed by all the economic and political resources that make a currency powerful. Meanwhile, the euro is severely handicapped by structural defects in the design of its governance mechanisms, and the yuan suffers from various practical limitations in both finance and politics. Contrary to today’s growing opinion, Currency Power demonstrates that the dollar will continue to be the leading global currency for some time to come.

Why the dollar is—and will remain—the dominant global currency The U.S. dollar's dominance seems under threat. The near collapse of the U.S. financial system in 2008–2009, political paralysis that has blocked effective policymaking, and emerging competitors such as the Chinese renminbi have heightened speculation about the dollar’s looming displacement as the main reserve currency. Yet, as The Dollar Trap powerfully argues, the financial crisis, a dysfunctional international monetary system, and U.S. policies have paradoxically strengthened the dollar’s importance. Eswar Prasad examines how the dollar came to have a central role in the world economy and demonstrates that it will remain the cornerstone of global finance for the foreseeable future. Marshaling a range of arguments and data, and drawing on the latest research, Prasad shows why it will be difficult to dislodge the dollar-centric system. With vast amounts of foreign financial capital locked up in dollar assets, including U.S. government securities, other countries now have a strong incentive to prevent a dollar crash. Prasad takes the reader through key contemporary issues in international finance—including the growing economic influence of emerging markets, the currency wars, the complexities of the China-U.S. relationship, and the role of institutions like the International Monetary Fund—and offers new ideas for fixing the flawed monetary system. Readers are also given a rare look into some of the intrigue and backdoor scheming in the corridors of international finance. The Dollar Trap offers a panoramic analysis of the fragile state of global finance and makes a compelling case that, despite all its flaws, the dollar will remain the ultimate safe-haven currency.

This economic and political science work is a rigorous analysis that demonstrates that although it is a privilege and a benefit for the US to have its currency, the dollar, as the leading world reserve currency, the privilege also proves to be a very significant economic and security burden imposed on the nation.

Today, a Great Powers arsenal extends well beyond the military, embracing soft power and also currency power. The dollar dominates the global economy, used in settling trade and investment deals but also held in reserve in vast quantities by central banks in case of a payments crisis. This demand for dollars keeps US borrowing costs lower than they otherwise would be, reinforcing the countrys economic power and helping to pay for the worlds strongest armed forces. This Adelphi sets out how the US has regularly deployed the power of the dollar to put pressure on foes such as Iran, as well as allies including the United Kingdom and Germany. Contributors, including Robert Zoellick, the former head of the World Bank, and John Williamson, a leading expert on currencies, assess how long the US will be able to maintain this exorbitant privilege in tandem with a rising China. Beijing, sensing that the global crisis might herald the end of the dollars supremacy, is eager to gain monetary power by carving out an international role for its own currency, the renminbi. The book examines the obstacles China must first overcome in its quest and the strategic consequences if it succeeds.

This book assesses the impact of globalization on the US economy from the perspective of international trade, finance, and immigration, with a view to eliminating misinformation in the current public debate about the costs and benefits of globalization. The United States has played a key role in the development of economic and financial globalization since the end of World War II and has been the largest force for integration of the global economy. While the US economy as a whole has been a net beneficiary from globalization, significant costs have been incurred by certain groups and communities as a result of its effects. This book evaluates the benefits, costs, and impact on income distribution for the United States in the areas of international trade, finance, and immigration, drawing on key findings of the relevant literature. A key argument of this book is that the US economy has been a significant net beneficiary from globalization, but that the government needs to do more for those workers negatively impacted by its effects. This book ends by proposing key institutional reforms at the national and international level that would foster further gains from globalization and create a more equal distribution of its benefits.