Why the Dollar Endures
To reduce emerging markets’ demand for safe assets, there is a crying need for a global insurance scheme to protect countries from panic-driven “runs” on their currencies. The only existing option is the International Monetary Fund, which bails out countries in distress, but often requires them to undertake painful (but necessary) reforms. This is politically unpalatable, leaving policy makers in these countries to self-insure by building up reserves — and intensifying their dependence on the dollar.
The world needs a system like the Federal Deposit Insurance Corporation, which protects American banks against runs.
.. The dollar’s continued prominence is ultimately less a parable about American exceptionalism than about weaknesses in the rest of the world and deep problems in the structure of the global monetary system.