Geopolitical power depends on financial power, each of which supports the
other. To ignore the real benefits of controlling the international currency
system is [unfortunate]…. The death of the dollar order will drastically
increase the price of the American dream while simultaneously shattering
American global influence.
—Historian Diane B. Kurtz, Foreign Affairs, 1995
CREATING A SUDDEN SENSE OF GLOOM ABOUT THE FUTURE of the US economy, the Great Crisis triggered widespread doubts about the future of the US dollar as the world’s reserve currency. Days before the April 2009 G20 Summit, in London, China’s central bank governor, Zhou Xiaochuan, slighted Washington, arguing that financial crises resulted from a clash between the domestic imperatives of the country issuing a reserve currency and international needs for stability. Zhou called for a super-sovereign reserve currency managed by a global institution, a reference to the International Monetary Fund’s special drawing rights (SDRs).
Since then, the dollar has been fair game in world affairs. Countless analysts have argued that the United States is in a net debtor position similar to Britain after World War I, a declining nation soon to lose its standing as the issuer of the reserve currency.1 Sensing an opportunity to openly criticize the United States, Russian President Dmitry Medvedev argued that a mix of regional currencies, including the ruble, would be required to help steady the world economy. The IMF was also enthused, with the First Deputy Managing Director John Lipsky arguing that SDRs could be used as the basis for a “revolutionary” step of creating a new global reserve currency that would gradually replace the dollar.2 Also, the euro was raised as a currency contender. Among others, World Bank President Robert Zoellick argued that if the dollar