Forget it, Zuckerberg, the Libra isn’t a rival to the dollar
We need a more equitable alternative, but I must disabuse Mark of his new bid for world domination
Valéry Giscard d’Estaing, one-time president of France, called it America’s “exorbitant privilege”. He meant the economic and geopolitical heft the US derives from the dollar’s position as the world’s leading reserve currency.
Despite its grandiose ambitions, the euro has so far come nowhere close to challenging dollar supremacy. The Chinese renminbi is still further behind. As things stand, there is no chance of either providing a credible alternative. In virtually every respect, the greenback remains utterly dominant; for pricing commodities such as oil, for invoicing and settling international trade, and as the currency of choice for both global securities issuance and official foreign exchange reserves.
If invoicing in dollars, it also makes sense to hold dollar-denominated assets, which gives the US an enormous advantage on cost and availability of capital. Unlike virtually everyone else, the US can borrow with impunity, and global capital markets feel obliged to finance it. With economic power goes the geopolitical stranglehold of the schoolroom bully; no bank, or indeed country, can afford to lose its dollar clearing licence. Without it, they are effectively out of business...