No. of Recommendations: 9
What would the costs to US business and consumers be if the dollar lost its reserve status?
The effects would be real, but not cataclysmic. After all, the world reserve currency used to be the Pound and Britain still has an economy. And before that Spain, and they’re still around too.
Are there advantages? Sure; borrowing costs are lower for business, individuals, and government. It gives us an advantage that foreigners hold dollars, because they are often recycled back to the US in the form of investments - in business or in Treasuries which keeps demand up and lets the government run deficits to keep money in motion.
But I wouldn’t worry about it too much. First, what’s gonna happen is what’s gonna happen. (Small comfort, I know.) But at the moment the US has about 60% of the world currency market, and the next closest is something like 15%. That doesn’t mean the world can’t change - obviously it already has a couple of times, just that it doesn’t seem imminent.
