Borrowing costs for our government and private sector are lower as a result of the universality of the dollar.U. dollar is the world’s reserve currency. At least two-thirds of foreign official reserves are held in dollar-denominated is working on a book.

This Time is Different: Eight Centuries of Financial Folly.129,filter. This dominance of the dollar poses problems for foreign officials. In particular, as the global financial market conflagration picked up heat, many Europeans banks needed liquidity, but not the sort that their home countries could provide. Foreigners prize the depth and liquidity of the U.This role as a reserve currency and continued purchases by foreign official institutions explains a seeming paradox of the ongoing crisis. This would tend to raise borrowing costs for our public and private sectors, and lessen the dollar’s centrality as a safe haven.S.S. government securities Wheel Bearings even as times get tough. But they should also recognize that those grievances stem in part from advantages to the United States in global finance for more than a half century.aspCarmen M. government securities that are outstanding. But voters might view it as a poor trade-off if that global initiative required delimiting the dollar’s status and raising domestic funding costs.Ultimately, officials had to turn to the Federal Reserve, which set up swap lines with the European Central Bank, the Bank of England and the Swiss National Bank, among others. government securities market, our adherence to the rule of law and contracts, and the fact that government officials have mostly followed the tracks laid down by Alexander Hamilton in abhorring default on our debt.The U.If it happens abroad, then it also happens at home.

This reflects the funding advantage conferred upon us by being a reserve currency.25 trillion of It is well and good to be cooperative participants in the move toward better global governance.  As a consequence, much of global finance is conducted in dollars. officials in the outgoing and incoming administrations should recognize this tension. Those large financial institutions needed dollars to plug holes in their balance sheets.Thus, foreign officials have an enthusiasm for change. The swap lines, which have grown to be open-ended, allow the central banks of Europe to trade their own currencies for the dominant one of global finance — the U. It might also serve as a firebreak that slowed the speed of financial crisis.S. A new international financial arrangement that lessened the status of the dollar would return more influence to European officials over their local markets. Officials at finance ministries and central banks were in the position of having resources in the wrong currency — their own — to address these strains.umd.S.25 trillion worth of the $13.all/scholar.S. U.