One can, of course, dismiss that, as did the former U.S. Treasury Secretary John Connolly in late 1971, when he told the meeting of the ten most important finance ministers in the world that "the dollar is our currency, but it is your problem."
The late John Connolly was well-known as a respected and charismatic political leader, but this message is an example of the harm such solo players can do. True, the dollar is the U.S. currency, but it is also true that the dollar is a de facto world currency, because it is an unmatched means of international payments and a principal store of value for official and privately held savings balances on a global scale.
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This episode is part of what is still known as the U.S. policy of dollar's "benign neglect."
But this not so benign idea of the drifting greenback became the core of the French-German determination to create the euro as an alternative to the dollar. That is still the unstated objective. Given that a quarter of world reserves is currently held in euros, and that the euro serves as a transactions currency and a legal tender in more than one-fifth of the world economy, it would be unwise to dismiss the European currency's challenge to dollar's supremacy.
It would be equally misguided to ignore the rising importance of the Chinese yuan. China continues to modernize its industry and financial markets, and, by some accounts, it is on the way of becoming the world's largest economy.
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The European terminology of the "defense of the dollar" is unnecessarily emphatic, but it does draw attention to the role the Fed's monetary policy should play to support American national interests in a world where nearly half of global trade is taking place in euro and yuan currency areas.
In this new game, the Fed needs all the collective wisdom of its highly-skilled technical staff, and of all of its FOMC members, to guide the U.S. economy and its financial system along a path of stable and sustained economic growth. That would be the best defense of the dollar and of U.S. global economic and political standing. And that should also be the only ideology driving the Fed's policy decisions. No charisma and quasi philosophers, please.
Michael Ivanovitch is president of MSI Global, a New York-based economic research company. He also served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia.