The Dollar Is Everyone's Currency and Nobody's Vote
Every six weeks, twelve people in a marble building in Washington set the price of money for eight billion people. Roughly 340 million of them get a vote. The rest get the bill. The dollar is the one American export that nobody can return to sender.
Economists call this the exorbitant privilege, and the phrase has always struck me as doing a lot of heavy lifting. The privilege is real enough: the world queues up to hold dollars — for trade, for reserves, for the rainy day — the way fans queue for playoff tickets, and America borrows more cheaply than anyone else on the planet. But read the Fed's statements closely and you notice something. When they say policy is “data dependent,” what they mean is: we will do whatever we decide, and you will find out at the same press conference as everyone else. This is not a criticism. It is a description of power, which in Washington is considered the same thing as weather.
The weather, however, falls unevenly. When the Fed raises rates to cool an overheating housing market in Ohio, a finance minister in Jakarta watches his country's dollar debts get heavier in real time — through no decision of his own, and with no seat at the table. When the Fed cuts to save jobs in Michigan, capital floods into Nairobi and São Paulo, inflating the asset bubbles their central banks must then pop with tools built for economies a tenth the size. The polite word for this is “spillover.” That is central-banker for “not our department.”
Meanwhile the East is building workarounds — payment rails, swap lines, reserve diversification, the whole dedollarization starter kit. Washington watches this the way a champion watches the bottom of the ninth: with outward calm and a bullpen getting warm. Some of it is theater; some of it is real plumbing. Either way, the smart money has noticed that the rest of the world is quietly pricing in a future where the vote and the bill are at least discussed in the same room.
None of this is an argument against the dollar. It is an argument for reading the box score. Reserve-currency status is usually described as a crown. It looks more like a utility bill — mailed to Washington, paid in installments large and small by everyone else. The Bureau's monetary grades still have the dollar winning going away, and going away it is. The only interesting question is how long seven and a half billion people keep paying for a vote they were never given — and what they are building while they wait.