Publication

For decades, the world has complained that the dollar's role as global reserve currency has given the US, in a term usually attributed to Charles de Gaulle but actually coined by his finance minister, Valery Giscard d’Estaing, an "exorbitant privilege." The US seems to have come as close as one can imagine to getting the proverbial "free lunch" – except that, as economists are fond of pointing out, there is no such thing. And that is true here as well: performing the role of reserve currency enables the US to borrow on the cheap, but at the cost of any significant influence over the exchange rate, which is determined by the rest of the world's demand for dollar assets.