CFR: The ‘Historical Anomaly’ of the Dollar
CFRJanuary 18, 2008
What if the international currency of the future isn’t the dollar, but isn’t the euro either? James D. Grant, the editor of Grant’s Interest Rate Observer and an expert on financial markets, discusses the “historical anomaly” of currencies like the dollar and the euro as uncollateralized international reserve currencies—that is, ones that aren’t backed by a guarantee that they can be exchanged for something else, such as gold or silver. Grant says the dollar has benefited from a largely successful grand experiment in uncollateralized currencies, but that this dynamic is being tested by current financial trends. For instance, foreign governments with large stock piles of dollars now seek to diversify these holdings, showing that their appetite for the currency has a limit.