Exorbitant privilege
Encyclopedia
The exorbitant privilege is a term coined in the 1960s by Valéry Giscard d'Estaing
, then the French Minister of Finance.
This quote is generally misattributed to Charles de Gaulle
, who is said to have had somewhat similar views.
"Exorbitant privilege" refers to the benefit the United States
had in the US Dollar being the international reserve currency
: the US would not face a balance of payments crisis, because it purchased imports in its own currency.
"Exorbitant privilege" as a concept cannot refer to currencies that have a regional reserve currency role, only global reserve currencies.
Recent McKinsey Global Institute research questions whether the benefit that the US enjoys is really that exorbitant, highlighting the countervailing loss of trade competitiveness from the high dollar (that typically results from its reserve status, all else equal). The phrase became the title of a 2010 book by economist Barry Eichengreen, examining the future prospects for the US Dollar's dominance in international trade.
Valéry Giscard d'Estaing
Valéry Marie René Georges Giscard d'Estaing is a French centre-right politician who was President of the French Republic from 1974 until 1981...
, then the French Minister of Finance.
This quote is generally misattributed to Charles de Gaulle
Charles de Gaulle
Charles André Joseph Marie de Gaulle was a French general and statesman who led the Free French Forces during World War II. He later founded the French Fifth Republic in 1958 and served as its first President from 1959 to 1969....
, who is said to have had somewhat similar views.
"Exorbitant privilege" refers to the benefit the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
had in the US Dollar being the international reserve currency
Reserve currency
A reserve currency, or anchor currency, is a currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves...
: the US would not face a balance of payments crisis, because it purchased imports in its own currency.
"Exorbitant privilege" as a concept cannot refer to currencies that have a regional reserve currency role, only global reserve currencies.
Recent McKinsey Global Institute research questions whether the benefit that the US enjoys is really that exorbitant, highlighting the countervailing loss of trade competitiveness from the high dollar (that typically results from its reserve status, all else equal). The phrase became the title of a 2010 book by economist Barry Eichengreen, examining the future prospects for the US Dollar's dominance in international trade.