The US Dollar's Continuing Hegemony as an International Currency: A Double-matrix Analysis

摘要

The standard framework for debating the international currency system casts doubt on the dollar's continuing hegemonic position because it raises questions regarding the ability of the US to finance its external liabilities in the face of worsening economic fundamentals. This article addresses these questions by adding to the usual matrix linking the international functions of money to two different types of agents, private and official, a second matrix linking the functions of money to two different types of commodities, material goods and services on the one hand, and financial securities on the other. Once it is understood that bonds and equities are now not only different types of funding instruments but also different types of commodities whose use value to the world's large investors is to serve as stores of value, it is possible to understand why the size of the US capital markets will long continue to bind foreign investors to the dollar because it will be some time before other capital markets will reach a comparable size.