The power and the limits of the American dollar

EVERYSOoften an appetite surges for an alternative reserve currency to the dollar—and a market booms in predictions of the greenback’s imminent demise. For nearly three-quarters of a century the dollar has at a global scale dominated trade, finance and the rainy-day reserve portfolios of central banks. Yet high inflation, fractious geopolitics and the sanctions imposed by America and its allies on countries such as Russia have lately caused dollar-doubters to become vocal once again.Often these episodes are fuelled by a world leader’s spasm of anger towards the dollar. In 1965 Valéry Giscard d’Estaing, then France’s finance minister, raged against the “exorbitant privilege” the greenback conferred on America. This time it was Luiz Inácio Lula da Silva, Brazil’s president, who on a recent visit to China called for emerging markets to trade using their own currencies. At the same time, a surging gold price and a fall in the dollar’s share of global reserves has roused other doubters, who can also point to this month’s admission by Janet Yellen, America’s treasury secretary, that over time using sanctions “could undermine the hegemony” of the currency. It does not help that America could soon face a fiscal crisis if Congress fails to raise the ceiling that limits how much the government can borrow.