A Mediterranean Battlefield - Syria

[Cliff Varnell]

[quote=David Guyatt]

I think we could break thru exaggeration, spin and over-simplification if you could point to me one negative impact "de-dollarization" has had on the US economy.

That's generous of you, Cliff, allowing me to "break through" the log jam of "exaggeration, spin and over-simplification" by pointing out one negative impact of something that hasn't yet happened. Never let it be said that you set the bar too high.

Ah. Then your "smell the fear" comment was nothing more than wishful thinking?

Jared Bernstein thinks the dollar's reserve currency status is a drag on the US economy.

http://jaredbernsteinblog.com/full-emplo...nnections/

But Paul Krugman disagrees, argues DRCS is no big deal either way.

http://krugman.blogs.nytimes.com/2014/10...rs-virtue/

emphasis added

Punished for the Dollar's Virtue?
October 7, 2014 3:48 pm October 7, 2014 3:48 pm

I rarely disagree with Jared Bernstein, and actually agree with most of his latest post. Yes, the persistent US trade
deficit is a problem for achieving full employment, and we should have a weak-dollar, not strong-dollar policy.

But is the dollar's reserve-currency status the root of the problem? I have long argued that reserve-currency status is
a much overrated phenomenon it's not actually a significant benefit to the country that issues the currency, even aside
from the employment issues. But I'm also not convinced that it's that big a deal when we try to understand persistent
trade deficits. After all, we're not the only country that has run persistent external deficits:

We do have things that cause a global savings glut to spill into America a big, deep financial market, with lots of
players willing to create what look like safe assets, a general sense that America is the refuge of last resort, and
so on. But Britain offers many of the same things, and has in fact a comparable record of persistent capital inflows
and deficits; while Australia has run really big external deficits for a very long time.

As a policy issue I don't think this matters too much we should seek a weaker dollar. But I don't think phrasing it
in terms of the reserve currency status is helpful.