LONDON -- A cursory assessment might find the United States a less than ideal candidate for the job of managing the planet's ultimate form of money.
Its public debt is enormous -- $22 trillion, and growing. Its politics recently delivered the longest government shutdown in the country's history. Its banking system is only a decade removed from the worst financial crisis since the Great Depression. Its proudly nationalist president provokes complaints from allies and foes alike that he breaches the norms of international relations, setting off talk that the U.S. dollar has lost its aura as the indomitable safe haven.
But money tells a different story. The dollar has in recent years amassed greater stature as the favored repository for global savings, the paramount refuge in times of crisis and the key form of exchange for commodities like oil.
The enduring potency of the dollar gives force to President Donald Trump's mode of engagement. It has enabled his Treasury to find buyers for government savings bonds at enviously cheap rates, even as his $1.5 trillion worth of tax cuts added to the debt. It has reinforced Trump's authority in imposing his foreign policies on an often-reluctant world by amplifying the power of his trade sanctions -- especially against Iran and Venezuela.
Because banks cannot risk jeopardizing their access to the plumbing of the dollar-based global financial network, they have taken pains to steer clear of nations and companies deemed pariahs in Washington.
"There is no alternative to the dollar," said Mark Blyth, an international political economist at Brown University. "We're stuck with the dollar, which gives the United States astonishing structural power."
In a clear indication that the U.S. currency has been gaining power, dollar-denominated lending to borrowers outside the United States, excluding banks, soared between late 2007 and early 2018, according to the Bank for International Settlements. It increased to more than 14 percent of global economic output from less than 10 percent.
China has sought to elevate the role of its currency, the renminbi -- commonly called the yuan -- to reflect its stature as a world power.
But China's unfolding economic slowdown, concerns about its soaring debts and unease from neighbors that its investment is really a new form of colonialism have combined to moderate its infrastructure plans.
The Chinese government's restrictions on taking money out of the country and its detentions of foreigners -- often in parallel with geopolitical scrapes -- have tested the appeal of holding money embossed with the image of Chairman Mao.
"What about China?" Blyth asked, rattling off possible alternatives to the dollar. "I could go there and disappear. This doesn't inspire confidence."
The most formidable competitor to the dollar has long been the euro. In September, the president of the European Commission, Jean-Claude Juncker, devoted part his final State of the Union address to lamenting that the bloc was paying for 80 percent of its energy imports in dollars, though just 2 percent came from the United States.
"We will have to change that," Juncker declared. "The euro must become the active instrument of a new sovereign Europe."
Business on 02/23/2019