In the column Eichengreen lays out some of the general concepts behind the book, including the idea that the US dollar may be losing its dominance over global markets, especially if politics and other factors force the US into a state of what Eichengreen refers to as “economic mismanagement:”
“The one thing that could jeopardise the dollar’s dominance would be significant economic mismanagement in the US. And significant economic mismanagement is not something that can be ruled out.
The Congress and Administration have shown no willingness to take the hard decisions needed to close the budget gap. The Republicans have made themselves the party of no new taxes and mythical spending cuts. The Democrats are unable to articulate an alternative. 2011 will see another $1 trillion deficit. It is hard to imagine that 2012, an election year, will be any different. And the situation only deteriorates after that as the baby boomers retire and health care and pension costs explode.
We know just how these kind of fiscal crises play out, Europe having graciously reminded us. Previously sanguine investors wake up one morning to the fact that holding dollars is risky. They fear that the US government, unable to square the budgetary circle, will impose a withholding tax on treasury bond interest – on treasury bond interest to foreigners in particular. Bond spreads will shoot up. The dollar will tank with the rush out of the greenback.”
Read more at voxeu.org.
The book itself traces the rise of the dollar over the course of the 20th century, and the challenges the currency is facing in the current world of globalization and the rise of powers like China and India. You can read the whole voxeu column here, or buy the book at Oxford University Press.