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It Is Time to Abandon Dollar Hegemony
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It Is Time to Abandon Dollar Hegemony

Issuing the World’s Reserve Currency Comes at Too High a Price

Simon Tilford and Hans Kundnani
Foreign Affairs, 2020
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Recommendation

In response to COVID-19, the American government has authorized trillions in monetary support for its economy, a move made possible in part by the US dollar’s status as the world’s reserve currency. Economists Simon Tilford and Hans Kundnani explore the benefits and disadvantages to the United States of that special position, and they examine whether it might be in the nation’s best interest to walk away from the role. Business executives, policy experts and economists will appreciate this informed and insightful report on the future of the US dollar.

Summary

Because the US dollar serves as the world’s reserve currency, the United States enjoys a distinct advantage, but that benefit comes with socioeconomic drawbacks.

For decades, America has accrued extraordinary gains from maintaining the globe’s reserve currency. The United States is able to borrow in massive amounts from around the world due, in large measure, to overseas demand for the US dollar. But this advantage has a flip side: bloated current account deficits, diminished competitiveness in trade, and domestic wealth and income inequality. Robust dollar appetite abroad undermines manufacturing exports, adversely affecting ...

About the Authors

Simon Tilford is the chief economist at the Tony Blair Institute for Global Change. Hans Kundnani is a senior research fellow at the Europe Programme at Chatham House.  

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