Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System

by Eichengreen Barry

Traditional Chinese edition of Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System - a timely analysis of the dollar's rise and potential fall. Author Barry J. Eichengreen is the professor of economics and political science at the University of California. In Traditional Chinese. Annotation copyright Tsai Fong Books, Inc. Distributed by Tsai Fong Books, Inc.

Genres: Economics, Finance, History, Nonfiction, Business, Politics, Money

304 pages, Paperback

First published December 13, 2010

Reviews

[Murtaza]

The power of the U.S. dollar and the implications of the entire planet using it as their reserve currency and medium of international trade is underappreciated by the American public. Since replacing the sterling for the top role during the 20th century, the dollar has effectively become a form of gold that the U.S. can conjure out of thin air. While printing $1000 costs nothing to the U.S. government other countries have to provide $1000 worth of goods or services to obtain this for their own use, a privilege enjoyed by the U.S. and historically known as "seignorage." Other countries that denominate their international trade in dollars must also pay significant exchange fees in transactions and inevitably develop a vested interest in maintaining the value of U.S. currency, which they hold in significant amounts as treasury assets. The U.S. for its own part benefits from this privilege in some sectors, but since it also means it can run a perpetual trade deficit it is underincentivized to develop its export sectors like manufacturing and as a country can effectively run on fumes. While this is great for a certain class of people who specialize in managing financial services, it often winds up leaving ordinary people at a loss.

This is one of those books that could've been better off as an essay. There was tons of filler about the Suez Crisis, the 2008 financial crash, the prospects of a sovereign debt crisis (this was written in 2011 for context) and other things that are related but not necessarily intrinsic to explaining what the U.S. gets out of its "exorbitant privilege" as reserve currency holder. The author does however explain why it'd be hard to replace, despite the basic unfairness that other countries have long chafed against. The U.S. is not the singular economic hegemon it once was and the world is decentralizing in all sorts of ways. In all likelihood the dollar will retain an important yet reduced role in the future.

[Ashleigh · Rating 4 out of 5]

Good food for thought. Most of the book is an overview/history of the global financial system.

The last 30 pages were better than I expected. I can see the relevance of his warning- the US’s growing fiscal deficits (ah-ahem 2018 tax cuts) and making it more difficult to support the US’s soft power (i.e. global aid, Fulbright scholarships, heeding to China’s outreach to other countries likely to have natural resources while not so excited about democratic values) while failing to invest in training and infrastructure (along with making tough expenditure cuts) at home are likely to lead to more problems down the road and could compromise the dollar’s position in the international monetary system.

However, I don’t see any viable alternative at the moment to the USD at the moment given the euro area’s issues and China’s unreadiness to become a freely tradable global reserve currency (yen is already out since they don’t want any appreciation to hurt exports). Brazil and India (as he suggests) also don’t seem very likely.

My sense is that the turnaround in the US’s policy direction will be more gradual. For example, given the direction we are heading in- unlikely to attain the growth rates needed (in my opinion) to make up for the loss in tax revenue (along with the inability to achieve immigration reform and hostility towards immigration; the reliance on the goodness of corporations to reinvest their profits in their workers and salaries; failing to repair our country’s crumbling infrastructure), it will take something such as further ratings downgrade(s) down the road to send the message that the current trajectory is unsustainable and the policy direction must be reversed.

In this way, I agree with the author’s conclusion that the future of the dollar is a product of US strength and therefore lies in our hands and our hands alone (not China’s etc.). Again, food for thought.

[Mike Sanders · Rating 5 out of 5]

A bit radical in language and tone, but makes up for it with the depth and breadth. Accuracy of the actual forecasts improve the strength of the structural explanation

[Frank Stein · Rating 3 out of 5]

Although this book is a transparent attempt by a respected economist to garner sales out of the current international economic turmoil, and though it provides no new research and even little original synthesis, Eichengreen has a flair for pithy descriptions and revealing anecdotes that makes it a worthwhile read.

For instance, he recounts in detail the meeting between President Nixon and President Pompidou of France in 1971 in the middle of the Atlantic, in the Portuguese Azores, after Nixon ended the dollar's convertibility into gold. The location was an attempt to show impartiality after Nixon's Treasury Secretary, the loud Texas governor John Connally, had accused Europe of forcing the US to carry the load of the international financial system. It was supposed to be a meeting of equals. Yet Pompidou came into the island on a brand new Concorde supersonic jet, a sign of rising European might, and when they both announced a significant devaluation of the dollar the next day, Nixon was tired and confused, having stayed up all night listening to the Washington Redskins game on radio. All signs pointed to the end of dollar dominance, and sure enough, within two years the United States was forced to devalue its currency again. After President Carter's Secretary of the Treasury Michael Blumenthal started claiming that the dollar was still too high in 1977, Europeans denounced his "open mouth policy" and he was forced the recant, though the dollar slid further.

Until it stopped and reversed. Just like today, people in the early 1980s predicted the end of its reign, but were proven wrong. The dollar became an even more important source of international reserves.

Now it looks like the dollar is in trouble again, and although the second half of Eigengreen's book is taken up with a confused and rambling take on the dollar's role in the 2008 financial crisis, he does make his point that the dollar most likely won't collapse, but will instead become just one important currency in the world's currency basket. For Americans this is something of a shame. He posits that the global investment in dollars probably reduced domestic interest rates by as much as 90 basis points (0.90%) in the 2000s and the US continues to receive significant extra cash from the fact that 85% of all the world's trade is conducted in dollars (that we print up and get goods for but that don't necessarily return to our shores). The end of this solitary reign will not be catastrophic, though, it will merely be part of the gradual convergence of the world economies where more and more countries share in the United States's prosperity.

[Ben · Rating 3 out of 5]

Around the time that Trump decided to temporarily tank the economy in April 2025 for no apparent reason, there was a lot of chatter about the dollar was at real risk of ending its run of being the world’s “international currency”. I realized I didn’t really know what that meant and wanted to learn more, and this economist, Barry Eichengreen, is an expert on the topic.

This book has a decent primer on what this means in practice, the advantages it affords the US, how it came to be, and what it would take for it to end. (Spoiler: severe economic mismanagement that leads other governments and investors to lose faith in the US as stable engine for growth. So, look out…) But even still, I found the international finance and economics concepts to be pretty tricky to keep straight, and I would have appreciated an even more 101 version.

There was also a lot of history, which I mostly found to be pretty uninteresting tbh. (I had to skip through most of the chapter about the events that eventually led to the Euro.) So if you just want a primer on the topic without the backstory, read the first two chapters and the last chapter, then skim through the middle.

[Adrian · Rating 5 out of 5]

Exorbitant Privilege is both a monetary history, and outstanding analysis of current events. Within, Eichengreen gives a financial history of the rise of the dollar, from its early origins, to its current status as undisputed king of the world monetary system.
The key link between the financial history and the present analysis is Eichengreen's presentations of financial crises, ranging from the collapse of Bretton Woods, to Britain's withdrawal from Suez. Here is offered apt comparison with current affairs.
Eichengreen is not a doomsayer by any means, but nor is he a naive optimist. Whilst not ruling out a collapse of the dollar, Eichengreen presents the case that a collapse due to geo-political disagreements, like the run on Sterling following the UK-US disagreement on Suez, is a scenario unlikely to repeat itself under present conditions.
The notion that the Chinese would offload their massive warchest of dollar reserves is unlikely, contends Eichengreen, due to the fact that such a move would be a self inflicted wound on the Chinese economy.
What is more likely is a loss of investor confidence through homegrown financial mismanagement.
The case for such a scenario is presented through an analysis of the current circumstances following the 2008 recession, and the current trajectory of the US economy, particularly the unsustainable nature of Social Security and Medicare in their current form, leading to a possible loss of investor confidence in the dollar.
Despite the title, the book does not predict an outright fall of the dollar, or at least not the inevitability of such a fall. What is rather the theme of the conclusion is a more multi-polar world of reserves, or the fall of the dollar being most likely self inflicted.
In all, a well researched, well chronicled, and highly comprehensive analysis of the current monetary system.

[Syed Ashrafulla · Rating 2 out of 5]

This is an interesting read describing rises and falls of currencies post-Mayflower. The theme is the description of how a currency becomes the global reserve, how that currency's holders exert influence, and how those holders lose power as the reserve changes.

The first part of the book is a very good synopsis of the sterling's reign at the top. It describes why having this "exorbitant privilege" is so important. Loosely, because everyone has confidence in your currency, that currency is the cash of the world and international trade is done in that cash. Since you're the one printing the cash, that means trade goes through you and you then exert a fee. On top of that, because other countries are using your currency for exchange, they have a vested interest in keeping your currency valuable.

It leads to other issues however (as Greece has had to do with the euro). The policy advice, which consistutes the last third of the book, is very haphazard. Maybe this is the problem of the academic: every argument is hazy and shrouded in counter-arguments that are just as hazy. The dollar should de-value for trade, but then that's not a good idea. The US should close their fiscal gap, but can't. China cares, but it doesn't. I understand that this is realpolitik, but it's not well-explained.

I know the complications because of other books (i.e. Currency Wars) but that is then prerequisite reading for Exorbitant Privilege. On its own, it only stands as a book with a decent introduction and historical exposition. The rest ... not so much.

[Malcolm Pellettier · Rating 3 out of 5]

read this on Jamie Galbraith's recommendation.

A) great history of the wranglings to secure global reserve currency status, and the sudden nature of losing said status: see the British sterling of 1947 Greece or 1956 Suez.
And a great history of Bretton Woods eventual dissolution from pegged currencies to the 35$ gold peg/convertibility.

b) a fine look at the current multipolar reserve possibilities, but frankly I'm more sanguine after reading about the fact that the greenback'll be the reserve currency for some time to come. The alternatives, the Euro and the Renminbi, are too beset with problems at the moment to seriously contend; however, the Renminbi by developing some depth in it's bond market (part of the greenback's appeal is the massive liquidity of treasury bonds) and using the renminbi regionally as the trading currency, will slowly but surely gain traction. This augurs for a very soft landing in the US; however Eichengreen warns us that, historically, changes in the reserve currency have been sudden and been caused by crises.

[Andrew · Rating 2 out of 5]

A breathless fast paced account of the rise of the US dollar as the international reserve currency, and the effect that has on global power relations, economic relations and the 'exorbitant privilege' it grants the US.

As the winningest, most stable economic power on the global, US dollars become the most sought after currency not just for trade with the US, but as a common reserve currency. This enables the US to print money, sell bonds to the rest of the world, and use that income to pay for its own excessive consumption and inflate poor regulated asset bubbles.

It also discourages competitiveness in US export markets as the premium other countries pay for US dollars means they don't have as much of an incentive to focus on productivity and quality as other countries.

[Lance Cahill · Rating 3 out of 5]

A nice antidote over concerns about the US Dollars role as a global reserve currency, but fell flat in some areas.

[Marcos Sorá · Rating 4 out of 5]

The book is a lesson in concise writing by probably the world expert on this topic. My impression after reading the book is that Eichengreen’s knowledge of history is so deep that he doesn’t need to flood the book with detail, but can highlight just a few events or actors and still them into context and show their significance.

Besides the historical aspects, of general interest, the book is useful for economists and people interested in public policy, specially from America. Why? Because soaring over the year to year events of American economic policy lurks its “exorbitant privilege”, of which policy makers may only be remotely aware. The US is able to finance its deficits cheaply, and it’s financial and no financial firms can do business everywhere in their local currency, because of this special status of the dollar.

Facing the possibility that the dollar loses its special status - seeing the big picture - should enhance prudence among policy makers, making salient longer term consequences of actions that, for example, increase non discretional deficit or erode investors confidence. Economists - academic economist specially - can find interest in learning about the intricacies that make dollars dominance an equilibrium. Of special interest in this regard is the possibility of a multipolar equilibrium in which multiple currencies are used globally.

[Jason Q · Rating 4 out of 5]

A lot of info packed into just 200 pages (font and margin are small, but still...) and frankly a great attempt to explain a very boring topic with humor. As the book name suggested, it basically walked you thru 150 years of USD history. While the book is technically focused on USD, I think it overlooked a couple of things. 1. EUR, Euro is perhaps only one bad election away from collapsing (all you need is ONE right wing party to win an election in either Germany or France) to take down the currency. Hence, it is very unlikely to ever become a major reserve currency like USD. 2. RMB, people often talks about how Chinese gov. is purposely depressing its currency to gain competitive advantage but fails to see MAYBE RMB itself is overvalued. While it is entirely possible (and likely) RMB becomes a regional settlement currency, RMB is only one deprecation away from losing all of its credibility & good will (if there's any). Again, RMB is highly unlikely to become a reserve currency like USD. JPY has a fairly strict capital control and Swiss Franc/GBP simply doesn't support the size of international trade. The likelihood for USD to loose its exorbitant privilege is rather slim for there's no good alternative.

[Saad · Rating 4 out of 5]

Must read for all economic thinkers and investors alike

Great journey into understanding the dollar’s rise and what threatens its fall. The author does well to sidetrack into explaining the context - the main events behind the rise and potential fall. It is a must read in my view for anyone involved anywhere in Economics and Finance.

Why one less star than five? I picked up this book before other to-read books, not only because of its subject but also it’s size (<200pp); but at the end of the book, I felt wanting for more detail and to read on.

All in all, wherever we are and whatever we do, this topic affects us all. You should read this one.

[Ashraful Islam · Rating 5 out of 5]

This book is an insightful look into the dominating role of the US dollar as the global reserve currency and the international settlement currency, and how it has gotten its “exorbitant privilege”. Its a great short read and hight recommended.

The book argues that while the dollar will likely remain important, it may no longer be the world’s sole reserve currency. Instead, a multipolar currency system—with the euro and renminbi playing larger roles—could emerge. Eichengreen suggests that this shift could be gradual and not necessarily destabilizing, as long as global institutions adapt.

[Ietrio · Rating 1 out of 5]

The work of a witch doctor that will tell you what the spirits have told him. A work of belief and shallow research. This way, the witch doctor will tell you about the rise of the US dollar in the 19th century, although in the early 20th century the US dollar was still irrelevant.

And of course, all ends up as another ode to Love your Leaders and how to make more regulation to give the Leaders even more power.

[Ethan · Rating 3 out of 5]

Useful for its history of the end of Bretton Woods, but seems to uncritically accept that in the 1970s, the policies of Volcker, the Taylor Rule, and monetarism were all justified (pp 110-112). Additionally, I am unconvinced by his argument that the most likely way the U.S. will lose its reserve currency status is through a dollar crash resulting from a high debt-to-GDP ratio, which he thinks is already too high in 2011 (pp 162-167).

[Mike · Rating 4 out of 5]

Exorbitantly good survey of the dollar's rise and great analysis of its eventual dethroning. A lot is fit into fewer than 200 pages and the book can serve as both a primer and in depth conversation of currency and international finance. An experienced student of economics will get more out of this than a novice, so buyer beware.

[Von_feng · Rating 4 out of 5]

国际货币成长记：国际贸易高，进出口商愿意使用该国的货币作为计价单位，这要求该国的货币具有稳定性同时拥有充裕流动性的金融市场（不然出口商收到该国的货币没有用处啊），而这种状况又是自我强化的（“在位”优势）。顺着这个思路来分析现在的国际货币体系：当年美元对英镑能挑战成功，首先是英国的经济不景气，使得投资者认为英镑的稳定性不再（稳定性是国际货币的首要考虑因素，其次是流动性），而美元这两方面都做得很好，成功C位出道。欧元作为美元的竞争对手，经历了主权债务危机之后，它的稳定性受损；人民币国际化进程在加速，但充裕流动性的深度金融市场是其瓶颈，毕竟这需要各种深化改革。目前美元依然是唯一的国际货币，但随着经济的多级化发展，国际货币体系也呈现多极化的趋势。

[Julius · Rating 5 out of 5]

Dollar has declined rather quickly after the election. Covid funding has led the debt to gdp ratio shoot up to 140%. There is no sight of fixing this with Republican majority. If the US continues this path of irresponsible fiscal policy without even a slightest sacrifice such as raising taxes on the rich, I can see dollar further slides 10-20%. Privilege is good until it's not. I would love to see the world led by the US not the authoritarian regime like China, but please the people in US needs to be better educated to understand their position in the world and act responsibly.

[Patrick Bateman · Rating 4 out of 5]

History of USD rising to global reserve curreny status explained; Author concludes USD will remain the single global reserve currency in the forseeable future, and its status will most likely be challenged by US domestic problem (e.g. unsustainable huge deficit).

[Carlos Luso · Rating 4 out of 5]

I give this book 4 stars for the final chapter and foreword.

The book has a big chapter about history and, in my opinion, does not engage the reader.
It would have been better to have more chapters in regards with possible futures and the economic crisis of 2008.

[WaldenOgre · Rating 4 out of 5]

从写作技巧和结构布置上来讲，这本书还有明显的提升空间。而且对于我这个经济学的入门者来讲，它也不算特别友好，因为个别未经详述的术语和段落已经超出了我的理解范畴。但它确实补足了我不少的认知空白，在这一点上我心存感激。

同时，我也已经能够足够清晰地理解到，人民币国际化的进程其实还遥不可期。在保持经济持续增长之外，更重要的还在于金融政策和经济结构的改革。而在这条改革链条的终端上，其实是政治制度的改革。

说到底，中国如今几乎所有困局的源头都是同一个。表面上的“中国速度”归根结底是不可持续的，因为在本质上，我们仍未能挣脱自我阻碍的宿命。

[Mit · Rating 3 out of 5]

I could follow the basic principles, but some parts of the book a difficult to follow. You probably need a re read especially if you have a limited exposure or knowledge of economics and functions of currency markets

[Makki · Rating 3 out of 5]

I remember being a bit disappointed by this. Maybe because I found it a bit difficult, and not very compellingly written. I actuall liked his Globalizing Capital more though. Perhaps I just feel better equipped for the subject matter nowadays.

[Aaron L. · Rating 4 out of 5]

A subject inherently bent towards being boring, made less so by a decent author.

[Marshall Jaffe · Rating 3 out of 5]

Good content, uninspired writing.

[he chow · Rating 5 out of 5]

最後三章算什麼呢？
我就是看美元霸權不順眼但又沒辦法消滅你。

二戰重新來過，第三次世界大戰的贏家就是新的在位帝國貨幣了。

[Sangam Agarwal · Rating 3 out of 5]

great book to learn concept of reserve currency in very short period of time.

[Arktos · Rating 4 out of 5]

A good general analysis of the history of the dollar's rise and vulnerabilities to its current dominance. Doesn't go into particular depth anywhere, though.

[Sammy Pan · Rating 3 out of 5]

The author may think he is explaining very well, but his thought is scattered haphazardly all over the place.