The dollar will remain king

 The dollar will remain king

Several years ago, at a meeting at the Peterson Institute for International Economics with economists who were beating up on the U.S. dollar’s poor underlying fundamentals, Paul Volcker raised a pertinent point. For the dollar to depreciate, it has to depreciate against another currency. He then raised a rhetorical question. Bad as the dollar’s economic fundamentals might be, which major currency had better fundamentals than did the dollar?

Paul Volcker’s insight is particularly relevant today. To be sure, the U.S. does have a major public finance problem that has to raise questions about the dollar’s long-run future. But so does Europe and Japan.

Meanwhile, the U.S. economy is now recovering from the pandemic at a much faster pace than those economies, which beckons an earlier start of a Federal Reserve interest rate increase cycle than those in Europe and japan. At the same time, it has very much deeper capital markets than…

Read full article…thehill.com