One of the factors helping the US economy is its position as the
reserve currency for much of the world - it has been the de-facto global currency,
but this may not last:
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The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2Ch2eya2j
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transactions.
High
quality global journalism requires investment. Please share this
article with others using the link below, do not cut & paste the
article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/005370e2-1137-11e2-8d5f-00144feabdc0.html#ixzz2CglauziS
The
global trading and financial systems require lubrication by an adequate
supply of homogeneous assets that can be bought and sold at low cost
and are expected to hold their value. For half a century, US Treasury
bills and bonds played this role. Their unique combination of safety and
liquidity has made them the dominant vehicle for bank funding globally:
it explains why the bulk of foreign exchange reserves are held in
dollar form, and why the role of dollar credit in financing and settling
international trade far exceeds the US share of international
merchandise transactions.
But as emerging markets
continue to rise,
the US will unavoidably account for a declining fraction of global
gross domestic product, limiting its ability to supply safe and liquid
assets on the scale required. The US Treasury’s capacity to stand behind
its obligations is limited by the revenues it can raise, which depend,
in any scenario, on the relative size of the US economy. With emerging
markets’ growth outstripping that of the US, the increase in the
capacity of the US Treasury to supply safe and liquid assets will
inevitably lag behind the increase in global transaction