Revoking America's Exorbitant Privilege

NEW YORK â?? The ongoing political stalemate in the United States holds two major implications for the international monetary system. The better-known consequence has been deepening uncertainty about the US dollar, the main global reserve currency, and US Treasury securities, supposedly the worldâ??s â??safestâ? financial asset. Not surprisingly, the major investors in US Treasuries, China and Japan, have expressed alarm. Simply put, the global economy has at its center a dysfunctional political regime that generates recurrent threats of default on the worldâ??s major reserve asset.