THE GLOBAL CURRENCY POWER OF THE US DOLLAR

An authoritative work offers a perspective on the United States dollar’s importance on the global stage.

This is economist/scholar Elson’s fifth book on global finance, distinguished by its narrower focus on the role that the dollar plays in the international economy. The author first covers the historical rise of the dollar since World War II, then demonstrates how it became the center of the global financial system. He finally addresses the benefits and defects of the dollar-centered system as well as possible reforms. Elson’s depth of knowledge on the subject is the basis for a solidly factual, if at times wonky, discussion. Still, even readers not steeped in global economics will surely comprehend the influence and implications of the “dollar zone,” which “has increased to around 65% of global GDP, involving more than half of the 195 countries in the global system with separate currencies.” The author shows how the U.S. routinely exerts its financial power internationally. But the more intriguing aspect of the book is the contrast of the dollar system’s benefits with its deficiencies. In particular, he exposes a number of weaknesses that intensify risk; for example, with the American economy becoming a smaller part of the global financial landscape in the past decade, it may “be unable to continue to satisfy a growing demand for safe assets without other countries becoming concerned about the debt sustainability of the United States.” Further complicating the vaunted current position of the dollar is, not surprisingly, the increasing power of the Chinese economy. Observers and students of the global economy are likely to find the chapter on “possible reforms” of the dollar-based system to be of great value. Here, Elson suggests that a shift to a multireserve currency system may be appropriate, although an “unbalanced and gradual process of evolution” in that direction “could be the source of financial instability.” Another key concern the author raises is the role of digital currencies (cryptocurrencies) and, more specifically, the potential for central bank digital currencies. Each chapter contains notes and references, and Elson’s concluding chapter is a fine summary of the book’s main points.

A cogent, persuasive, and timely look at the dollar’s power.