Book Review: The Biography of A Dollar

The first effort of industrialization and making the globe its market was championed by English but their currency Pound could not remain the global currency after the world wars. USA emerged as protagonist with the next wave of industrialization, economic growth with size and strength. And the Dollar began to gain prominence. Detaching the value of Dollar from Gold did hurt it initially but paved a grand way for it to become the reserve currency of the world. 

Today, 61% of the forex reserves held all over the world are in Dollars. This money running into trillions of dollars is a loan to the Govt. of US without any interest. Since most of the commodities are traded in Dollar, US does not have to incur forex costs and can trade with very lean forex reserves. This is a privilege for the home country of a dominant currency. US Govt. can borrow massively, run huge deficits, central bank can expand balance sheet without affecting the value of its currency. This is an advantage for US but it is a form of a global tax for rest of the countries who use dollar even when they are not trading with US but as an international currency.

Dollar is accepted everywhere, but how and who made this happen? What makes emerging countries maintain higher reserves of dollars? Will the dollar remain unchallenged, even after a potent competitor is born in Euro? If dollar is going to lose value, US won’t be the lone loser, all countries who hold dollar reserves too will lose. It is in the best interest of global commerce to have a single dominating currency. But faith in dollar does mean faith in the US economy. Will it retain the trust when the US appears to be living beyond its means? While the scenarios are changing, trust in dollar is slowly fading but yet dollar is going to remain a dominant currency for some more time to come is the essence of the book.