Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System

Reviewed by Richard N. Cooper

In This Review

Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System
By Barry Eichengreen
Oxford University Press, USA, 2011
224 pp. $27.95
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Reform of the international monetary system is on the agenda for the G-20's 2011 summit. Eichengreen, an economic historian, has written a brief and readable account of how the international monetary system got where it is today and of past efforts, both successful and (mainly) unsuccessful, to reform it. He argues that the dollar is deeply embedded in the world economy and that it will be difficult for any alternative -- the euro, the yuan, or the International Monetary Fund's reserve asset, Special Drawing Rights -- to dislodge it anytime soon. The dollar continues to be attractive because of the size of the U.S. economy and the scale and liquidity of U.S. financial markets and, above all, because many foreign firms and governments continue to use it. Eichengreen also skillfully debunks the notion that the Chinese government could damage the United States by dumping its large holdings of dollars and the view that the United States' geopolitical influence hinges on the international role of the dollar. In fact, any serious damage to the United States' role in the world is likely to be done by Americans' own inattention to fiscal discipline.