Dollar Dominance: Can the US Keep Its Edge? w/ Stephen Kirchner - EP246

This episode features a conversation between Gene Tunny and Stephen Kirchner about the US dollar's dominance in global finance. They examine the reasons behind the dollar's strong position, the effects of US fiscal policy and public debt, and the debate over its future role. Kirchner explains how the US's status as a net oil exporter influences currency dynamics and global trade.

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About Stephen Kirchner

Stephen Kirchner is the Senior Economist at the Business Council of Australia, the former Program Director for Trade and Investment at the United States Studies Centre at the University of Sydney, and a Senior Fellow of the Fraser Institute. An expert in monetary and fiscal policy, financial markets, and trade economics, Mr. Kirchner was formerly a research fellow at Australia's Centre for Independent Studies, an economist with Action Economics, LLC and a former director of economic research with Standard & Poor's Institutional Market Services, based in Sydney and Singapore. He has also worked as an advisor to members of the Australian House of Representatives and Senate.

Mr. Kirchner holds a BA (Hons) from the Australian National University, a Master of Economics (Hons) from Macquarie University, and a PhD in Economics from the University of New South Wales. He blogs at www.institutional-economics.com and is active on Twitter (@insteconomics).

What’s covered in EP246

• US dollar's global role as reserve currency, benefits, and potential challenges. (0:00)
• US fiscal policy and its impact on the US dollar's global role. (8:40)
• Monetary vs fiscal policy dominance in determining interest rates and exchange rates. (14:39)
• US dollar's role in global finance and its potential replacement by other currencies. (20:39)
• China's economy, currency, and trade agreements. (29:59)

Takeaways

1. The US dollar's dominant role in global finance is largely due to the unparalleled size, depth, and liquidity of US capital markets.
2. Despite concerns about the US fiscal position, the demand for US assets remains strong, which supports the dollar's value.
3. Other economies, like the Eurozone and China, face challenges in rivaling the US dollar due to less developed capital markets.
4. The US becoming a net oil exporter has altered the traditional relationship between the US dollar and commodity prices.
5. Fiscal policy in the US, while concerning, does not currently pose an immediate threat to the dollar's global dominance due to strong international demand for US assets.

Links relevant to the conversation

Stephen’s post on dollar dominance:

https://stephenkirchner.substack.com/p/dollar-dominance-if-you-can-keep

Stephen’s US Studies Centre article “The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy”:

https://www.ussc.edu.au/the-reserve-currency-myth-the-us-dollars-current-and-future-role-in-the-world-economy

Stephen’s post on how the US dollar is now a commodity currency

https://stephenkirchner.substack.com/p/why-is-the-australian-dollar-so-weak

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Full transcripts are available a few days after the episode is first published at www.economicsexplored.com.