Make Me Smart Watch the dollar!
May 20, 2025
Kenneth Rogoff, a Harvard economics professor and author of "Our Dollar, Your Problem," dives into the declining strength of the U.S. dollar, exploring its pivot from global dominance amidst rising tariffs and interest rates. He discusses the intricate ties between military power and currency stability, as well as the looming threat of emerging currencies. The conversation also sheds light on upcoming cryptocurrency regulations and the sociopolitical undercurrents of these developments. Plus, listeners share books that help them reset during tough times.
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Dollar's Rise as Reserve Currency
- After World War II, the U.S. emerged economically stronger than the UK, making the dollar the global reserve currency.
- The dollar's dominance was cemented by linking it to gold and by global reliance on the US economy.
Unusual Dollar Weakening
- Normally, rising U.S. interest rates strengthen the dollar by attracting money.
- But recent episodes saw money fleeing the U.S. despite rising rates, signaling a weakening dollar trend.
Exorbitant Privilege Explained
- The dollar's "exorbitant privilege" means the U.S. can borrow cheaply and invest abroad without similar reciprocal obligations.
- This status grants the U.S. immense economic benefits and global influence.
