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New Indian Express
14-06-2025
- Business
- New Indian Express
Looking at the dollar as reserve currency when Trump is floating his "big and beautiful" agenda
These two new books by well-credentialled economists examine the role of the US dollar in international finance. The story has its origins in the July 1944 meeting at the Mount Washington Hotel in Bretton Woods, New Hampshire, which established the post-Second World War international financial order. The objective was to facilitate free trade based on convertible currencies and stable exchange rates. The troubled pre-war gold standard, where the standard unit of currency was a fixed weight of gold, was not considered feasible. There was insufficient supply of the precious metal to meet expected demands of international trade and investment in the post-war economy. The communist Soviet Union, emerging as a rival to the USA in the global order, also controlled a sizeable proportion of known gold reserves. The debate came down to differences between John Maynard Keynes, representing the UK, and a senior US Treasury department official Harry Dexter White, who allegedly was a Soviet spy. Keynes' bold solution was a world reserve currency (the Bancor) administered by a global central bank. White rejected the proposal: "We have been perfectly adamant on that point. We have taken the position of absolutely no." The meeting took place against the background of a still raging war, the rise of fascism, and the Great Depression. The US had emerged as the pre-eminent economic and military great power as well as the world's richest nation and the biggest creditor. The British and the French, devastated by two world wars, needed American money to rebuild their economies. White's view prevailed. Bretton Woods established a system where the US dollar effectively assumed the role that gold had played previously in the international financial system. Countries pegged their currencies to the dollar which as the principal reserve currency was to have a fixed relationship to gold ($35 an ounce). The Bretton Woods system was ultimately undermined by large US budget deficits to pay for the Vietnam War and President Johnson's Great Society programs, inflation and increased dollar outflows. The dollar's convertibility to gold was removed. There was a shift to predominately market set exchange rates. However, the dollar continued as a major trading and reserve currency. 96 percent of trade in the Americas, 74 percent in the Asia-Pacific region, and 79 percent in the rest of the world is denominated in the currency. Only in Europe where the euro is dominant with 66 percent share is its market share low. About 60 percent of international and foreign currency claims (primarily loans) and liabilities (primarily deposits) are in US dollars. Its share of foreign exchange transactions is around 90 percent. US dollars constitute around 60 percent of global official foreign reserves. These shares are disproportionate to the size of the US economy (around a quarter of global GDP or 15 percent adjusted for purchasing power). King Dollar and Our Dollar, Your Problem, as evidenced by the trite titles (the latter based on Treasury Secretary John Connally's much cited barb), offer conventional histories, rarely deviating much from the accepted narrative. Much of this ground was traversed by Barry Eichengreen in his 2010 book Exorbitant Privilege. Jeffrey Garten's 2021 book Three Days at Camp David- How a Secret Meeting in 1971 Transformed the Global Economy also provides a more nuanced perspective especially on the decoupling from gold. Garten was present during the discussions that led to the suspension and then closure of the gold window. Both books purport to address the question which has been asked intermittently for over half a century: can the dollar survive as the global reserve currency? There are broadly two camps. Those who believe that the announcement of the dollar's death, like Mark Twain's, is greatly exaggerated. Others believe that structural changes in the global economy mean the relegation of the American currency to a lesser, often unspecified, role, perhaps as one of a suite of reserve assets. Both authors reference the standard problems of a reserve currency. The first is the 'policy trilemma' or 'impossible trinity' proposition of economists Robert Mundell and Marcus Fleming. It argues that an economy cannot simultaneously maintain a fixed exchange rate, free capital movement, and an independent monetary policy. The second is the paradox named after economist Robert Triffin. This states that where its money functions as the global reserve currency, a country must run large trade deficits to meet the demand for reserves. Any aspirant to a new global reserve currency status must accept an unacceptable loss of economic control and must run large current account deficits. Blustein and Rogoff do not see these problems posing any immediate risk to dollar dominance. Arguably no other country, such as Japan, Europe or China, which potentially could fill America's role, would want their currency to function as a reserve currency because of the issues mentioned. That is, if they fulfill all the requirements, which they do not in any case. Paul Blustein argues that the dollar's dominance is underpinned by American military power, the US rule of law, and confidence in the dollar as a store of value. The latter is somewhat surprising in that the currency has lost some 99 percent of its purchasing power due to inflation since the early 1970s. King Dollar argues that its long-standing role in trade and capital flows creates a network effect which makes it hard to displace. Rogoff takes a similar position. Our Dollar, Your Problem examines the reasons behind the failure of the Soviet Union (to the surprise of this reader), the Yen, the Euro and Renminbi to reduce the role of the dollar. Rogoff, best known for his controversial This Time It's Different, does express concern that US debt levels, high interest rates, inflation and geopolitical instability could undermine the dollar's position. Unfortunately published before the new US administration took office, both titles look prematurely dated. The world has changed. The Trump administration sees major problems with the dollar's role as a reserve currency. One concern is that it led to overvaluation which has destroyed America's industrial and manufacturing base. A related issue is persistent trade deficits which have driven the US to become the world's largest debtor (foreign liabilities exceed foreign assets by $26 trillion). The arguments, whether correct or not, were raised before in the 1970s and 1980s. A new issue is the President's obsession around US military expenditure which provides allies with security cover. He argues, not without cause, that it has allowed beneficiaries to enjoy free-rider benefits diverting spending to other productive areas without compensating America for its high cost. President Trump and his advisors have plans to tackle the problem. Tariffs are one part of the program. The reason that these target allies is that some hold dollars and, in the poorly founded opinion of the administration, all can be coerced into helping the US implement its agenda. Another involves further weaponising the dollar through sanctions, asset seizures and control of payment systems, a process that has been underway for the last two decades. Both Blustein and Rogoff mention these measures although their impact was better covered in British historian Mark Galeotti's 2022 book The Weaponization of Everything: A Field Guide to the New Way of War. The most far-reaching step (proposed by Stephen Miran, now chair of the US Council of Economic Advisers) would entail user fees for holding US Treasuries (effectively a withholding tax), forcibly exchanging US treasuries for low- or zero- coupon century (100-year) or perpetual bonds (arguably a default) or placing the bonds in escrow (a seizure). Other options include capital controls and denying access to US capital markets. In essence, Trump's "big and beautiful" agenda is for other states to accept tariffs on their exports to the US without retaliation, invest in America by relocating production facilities, purchase US exports and pay tribute to the US (preferably all while prostrating and abasing themselves to access the biggest market in the world!). It is difficult to see how large sovereign countries or groupings like China, Japan, India, Brazil and Europe will find this acceptable. For a start, it would be political suicide domestically. Instead, these actions undermine the dollar's value as well as foreigners' willingness to hold the currency and US assets. The new US administration's cavalier disregard for legal process and the courts are also unlikely to build confidence in the integrity of the US or its financial system. The 'sell America' movement already underway may accelerate quickly as allies shift away from the US, seeing it as an unreliable and rogue actor. Nothing focuses the mind better than the threat of evisceration of your savings and wealth. What King Dollar and Our Dollar, Your Problem skirt is the unsustainable trade and capital imbalances in the global economy that have been building for a long time. These fundamentally underlie the need for a reserve currency. Where India imports more than it exports to China, if denominated in rupees, would leave the Chinese with surplus Indian currency. Alternatively, if denominated in Chinese renminbi, India would have to finance the deficit. This requires unfettered access to investments or funding in the respective currencies. The US tariffs and increased focus on sovereignty and security mean that trade is likely to become more bilaterally balanced. This would reduce surpluses to invest or deficits to finance decreasing the need for a reserve currency. The structure can be extended to encompass trading blocs where imbalances net out between members when aggregated and multi-lateral arrangements such as currency swaps to manage surpluses and shortfalls as needed. High saving rates and mercantilist policies, exporting more than you import and amassing surpluses to finance control of resources and assets, are not sustainable in the long term. As East Asia and the petrostates are discovering, the security of foreign investments is never guaranteed. These states are tentatively moving to increase currently modest domestic consumption, improve low credit availability and expand limited state social infrastructure for education, the aged and healthcare. This would reduce their reliance on trade and exports. Alongside improving domestic capital markets and the range of available investments, this would reduce surpluses requiring investment movement away from free trade and capital flows has implications for prosperity, especially for smaller and emerging nations. But it is difficult to see how this can be avoided. The drift to autarky underway with reductions in trade and saving imbalances may diminish the need for reserve currencies. It implies a world of multiple trading and reserve currencies which has existed at various times in history. King Dollar and Our Dollar, Your Problem are overly US-centric and overoptimistic in their core belief that the dollar's reserve currency status is secure. Given America's economic, political and social problems, this confidence will be tested over the coming years. Satyajit Das is a former banker and author of numerous technical works on derivatives and several general titles: Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011) and A Banquet of Consequence – Reloaded (2021). His latest book is on ecotourism – Wild Quests: Journeys into Ecotourism and the Future for Animals (2024).
Yahoo
12-06-2025
- Health
- Yahoo
Women's Prize for Fiction ‘greatest honour' as an intersex woman, says winner
The winner of the Women's Prize for Fiction has said the award is 'the greatest honour of my life as a woman' as she reflected on her experience growing up intersex. Dutch author Yael van der Wouden won the accolade for her debut novel, The Safekeep, and used her winner's speech to champion the trans community, who have 'changed the system' and 'fought for health care'. The book, which explores repressed desire and the unresolved aftermath of the Holocaust in post-Second World War Netherlands, was described as an 'astonishing debut' by the head of the judges. The ceremony, held in central London on Thursday, saw the non-fiction prize awarded to physician Dr Rachel Clarke for The Story Of A Heart, which explores the human experience behind organ donation. In her winner's speech, after thanking the judges, van der Wouden said: 'I was a girl until I turned 13, and then, as I hit puberty, all that was supposed to happen did not quite happen. 'And if it did happen, it happened too much, and all at once my girlhood became an uncertain fact. 'I won't thrill you too much with the specifics, but the long and the short of it is that, hormonally, I'm intersex. 'This little fact defined my life throughout my teens, until I advocated for the health care that I needed. 'The surgery and the hormones that I needed, which not all intersex people need. Not all intersex people feel at odds with their gender presentation. 'I mention the fact that I did, because in the few precious moments here on stage, I am receiving, truly, the greatest honour of my life as a woman, presenting to you as a woman, and accepting this Women's Prize. 'And that is because of every single trans person who's fought for health care, who changed the system, the law, societal standards, themselves. I stand on their shoulders.' The NHS website says intersex, or differences in sex development (DSD), is a group of rare conditions involving genes, hormones and reproductive organs that mean a person's sex development is different to most. In contrast, people who are transgender identify as a gender separate to the sex they were born in and sometimes go through gender-affirming surgery. Van der Wouden's novel follows Isabel, a young woman whose life in solitude is upended when her brother's girlfriend Eva comes to live in their family house in what turns into a summer of obsession, suspicion and desire. The chairwoman of the judges for the fiction prize, writer Kit de Waal, said: 'This astonishing debut is a classic in the making, a story to be loved and appreciated for generations to come. Books like this don't come along every day.' Van der Wouden will receive £30,000 and a limited-edition bronze statuette known as the Bessie, which was created and donated by artist Grizel Niven. The judging panel for the Women's Prize for Fiction included novelist and journalist Diana Evans, author and journalist Bryony Gordon, writer and magazine editor Deborah Joseph, and musician and composer Amelia Warner. Clarke said she has 'literally been a feminist since I was too young to know what that word even meant', as she collected her award. The physician's book recounts two family stories, documenting how medical staff take care of nine-year-old Kiera in her final hours after a car accident, while offering a new life to nine-year-old Max who is suffering from heart failure from a viral infection. Clarke, who is behind the books Breathtaking and Your Life In My Hands: A Junior Doctor's Story, will receive £30,000 and a limited-edition piece of art known as the Charlotte, both gifted by the Charlotte Aitken Trust. The judging panel for the non-fiction prize included writer and broadcaster Dr Leah Broad, whose work focuses on women's cultural history, and novelist and critic Elizabeth Buchan. Previous winners of the fiction prize include Tayari Jones for An American Marriage and Madeline Miller for The Song Of Achilles, while the first non-fiction prize was awarded last year to Naomi Klein for Doppelganger: A Trip Into The Mirror World. The awards were announced by the Women's Prize Trust, a UK charity that aims to 'create equitable opportunities for women in the world of books and beyond'.
North Wales Chronicle
12-06-2025
- North Wales Chronicle
King expresses sympathy for Austria in wake of ‘horrific' school shooting
Charles described how the 'horrific attack' was all the more dreadful because 'schools should be places of sanctuary and learning'. Ten people were killed in the shooting at the Borg Dreierschutzengasse secondary school on Tuesday, which ended with the gunman taking his own life. The King's message to the people of Austria following the school shooting in Graz. — The Royal Family (@RoyalFamily) June 12, 2025 Austria has declared three days of national mourning following what appears to be the deadliest attack in its post-Second World War history. Charles wrote: 'My wife and I were deeply shocked and saddened to learn about the appallingly tragic events at the Dreierschutzengasse school in Graz. 'Schools should be places of sanctuary and learning, which makes this horrific attack on students and staff all the more dreadful.' He added: 'Our most heartfelt thoughts and prayers are with the families of all those affected by this terrible loss of life and injury. 'We send our deepest sympathy to all Austrians at this profoundly distressing time.' Police said they found a farewell letter and a non-functional pipe bomb when they searched the home of the gunman. The 21-year-old Austrian man lived near Graz and was a former student at the school who had not completed his studies.
Leader Live
12-06-2025
- Leader Live
King expresses sympathy for Austria in wake of ‘horrific' school shooting
Charles described how the 'horrific attack' was all the more dreadful because 'schools should be places of sanctuary and learning'. Ten people were killed in the shooting at the Borg Dreierschutzengasse secondary school on Tuesday, which ended with the gunman taking his own life. The King's message to the people of Austria following the school shooting in Graz. — The Royal Family (@RoyalFamily) June 12, 2025 Austria has declared three days of national mourning following what appears to be the deadliest attack in its post-Second World War history. Charles wrote: 'My wife and I were deeply shocked and saddened to learn about the appallingly tragic events at the Dreierschutzengasse school in Graz. 'Schools should be places of sanctuary and learning, which makes this horrific attack on students and staff all the more dreadful.' He added: 'Our most heartfelt thoughts and prayers are with the families of all those affected by this terrible loss of life and injury. 'We send our deepest sympathy to all Austrians at this profoundly distressing time.' Police said they found a farewell letter and a non-functional pipe bomb when they searched the home of the gunman. The 21-year-old Austrian man lived near Graz and was a former student at the school who had not completed his studies.
South Wales Guardian
12-06-2025
- South Wales Guardian
King expresses sympathy for Austria in wake of ‘horrific' school shooting
Charles described how the 'horrific attack' was all the more dreadful because 'schools should be places of sanctuary and learning'. Ten people were killed in the shooting at the Borg Dreierschutzengasse secondary school on Tuesday, which ended with the gunman taking his own life. The King's message to the people of Austria following the school shooting in Graz. — The Royal Family (@RoyalFamily) June 12, 2025 Austria has declared three days of national mourning following what appears to be the deadliest attack in its post-Second World War history. Charles wrote: 'My wife and I were deeply shocked and saddened to learn about the appallingly tragic events at the Dreierschutzengasse school in Graz. 'Schools should be places of sanctuary and learning, which makes this horrific attack on students and staff all the more dreadful.' He added: 'Our most heartfelt thoughts and prayers are with the families of all those affected by this terrible loss of life and injury. 'We send our deepest sympathy to all Austrians at this profoundly distressing time.' Police said they found a farewell letter and a non-functional pipe bomb when they searched the home of the gunman. The 21-year-old Austrian man lived near Graz and was a former student at the school who had not completed his studies.
