Mark Twain’s famed riposte that “reports of my death have been greatly exaggerated” has applied equally well to the behaviour of the US Dollar for more than five decades. Having constituted the linchpin of the postwar international currency system until the US government abandoned a fixed parity with gold in the early 1970s, the US currency has since frequently been subject to apocalyptic predictions of impending collapse.

Such predictions have had much in common with a medieval morality play, with the US currency assured to suffer painful retribution as a consequence of the US living consistently beyond its means – a parlous state of affairs signalled by chronic fiscal and current account deficits.

Such a dollar collapse – the result of foreigners refusing any longer to finance these “twin deficits” – has in turn been repeatedly predicted to result in a sharp and prolonged upward spike in Treasury bond yields and a consequent uncomfortably hard landing for the highly-leveraged US economy, together with all the adverse knock-on effects an implosion of domestic demand in the global economy’s largest importer implies for the rest of the world.

In the event, of course, the US dollar has suffered no such catastrophic collapse. It did, of course, suffer a sharp and protracted decline during the “stagflationary” 1970s, with the US government forced to resort to issuing hard currency bonds in 1978 to restore eroded confidence overseas. Fed chair Volcker’s subsequent quashing of inflation, however, restored waning faith in the solidity of the US currency. Indeed, the Fed’s uncompromising monetary stance, coupled with the Reagan government’s “guns and butter” fiscal regime, sent the US dollar to such stratospheric heights that the 1985 Plaza Accord was struck with the aim of bringing the currency down to a markedly less overvalued level.

Since then the US currency has remained volatile. It has, however, never suffered a disorderly decline despite a persistent external deficit which in the years prior to the Global Financial Crisis exceeded 5% of GDP.  Furthermore, it’s especially instructive that the US dollar’s real trade-weighted measure earlier this year stood remarkably close to the level which obtained prior to Nixon’s abandonment of gold convertibility in August 1971.

This impressive resiliency of the US currency – and, in particular, its continued unchallenged role as the global financial system’s principal reserve currency – displayed over so many years constitutes the focus of Paul Blustein’s latest book. I say ”latest” because Blustein has previously authored six books on matters directly germane to the financial world. Crucially, moreover, he is a veteran financial journalist, having enjoyed an impressively lengthy career writing for the Washington Post and Wall Street Journal.

The book’s scope is impressively ambitious, delving back into the distant past in seeking to explain how the US currency became the world’s predominant currency and then going on to weave its way through successive debates about whether the US dollar’s hegemonic dominance was set to be sustained or, alternatively, replaced by a more suitable contender – just as the US dollar supplanted the pound sterling a century ago. In this latter connection his chapter “Pretenders to the Throne” is especially instructive. 

Subsequent chapters focus upon the progressive “weaponisation” of the US dollar via the imposition of trade and financial sanctions, the possible challenges posed by crypto and digital currencies and the key role played by the Fed in maintaining the US dollar’s supremacy by dint of the success of its counter-inflation endeavour and its willingness to act as global lender of last resort, as evinced by its behaviour to alleviate the stresses generated by the Global Financial Crisis and, subsequently, the worldwide pandemic. Importantly, Blustein is an optimist about the dollar’s continued ascendancy, though he willingly concedes that Trump’s second term may take us into uncharted and dangerous waters.

The ground covered by the book is impressively extensive and highly instructive (a stellar example of “all you wanted to know about the dollar” in stripped-down form). Nonetheless, Blustein wears his learning lightly, capably dissecting and deftly explaining complex issues. Importantly, moreover, he writes throughout in an eminently readable fashion (as doubtless befits a financial journalist with decades of experience under his belt). Overall, this is a book that can be enthusiastically recommended, particularly at a time at which the outlook for US financial markets and the US currency is so uncertain.