Barry Eichengreen on the Dollar and International Finance

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4.7 • 4.3K Ratings

🗓️ 6 June 2011

⏱️ 65 minutes

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Summary

Barry Eichengreen of University of California, Berkeley and author of Exorbitant Privilege talks with EconTalk host Russ Roberts about the history and importance of the dollar as the dominant international currency. Eichengreen explains the advantages to the United States of the dollar's dominance, the historical circumstances that led to its dominance, and the likelihood that the dollar might be supplanted by a competitor. Along the way they discuss China's currency policy, the state of U.S. monetary policy, the causes of the crisis, the risk of inflation in the United States, and the future of the Federal Reserve.

Transcript

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0:00.0	Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ Roberts
0:13.9	of George Mason University and Stanford University's Hoover Institution. Our website is econtalk.org
0:21.2	where you can subscribe, find other episodes, comment on this podcast, and find links to
0:26.5	another information related to today's conversation. Our email address is mailadicontalk.org. We'd
0:33.6	love to hear from you.
0:36.7	Today is May 24, 2011, and my guest is Barry Icon Green, the George C. Pardy and Helen N. Pardy
0:45.3	Professor of Economics and Political Science at the University of California Berkeley. He is the
0:50.0	author of Exorbitant Privilege, The Rise and Fall of the Dollar, and the future of the International
0:54.9	Monetary System. Barry, welcome to Econ Talk.
0:57.9	Thank you, Russ. How good to be here.
0:59.9	Your book is a brisk history of international finance, focusing on how the US dollar became
1:05.2	the dominant currency in the world, and the possibility that that dominance might come to
1:10.0	an end sometime in the future. Let's start with why it matters. Why is it important that the
1:15.9	dollar is the dominant currency? Why is that important to the United States?
1:19.9	Well, the fact that the dollar is the dominant currency is considerable convenience to US
1:27.2	banks and firms. When they do business with foreign banks and firms, they can do it in their
1:34.2	own currency without having to incur the cost of buying euros or with banks or British
1:45.2	accounts, and they don't have to ensure against the risk that the exchange rate will change
1:51.3	while that business is underway. Other countries look at us, Chinese look at us, and they
1:59.7	see that it's an advantage for American banks and firms to be able to do business globally
2:07.0	in dollars. That's part of the motivation now for the Chinese to begin to move cautiously
2:14.4	internationalize their currency as well.
	...

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