Introduction
The concept of the dollar's exorbitant privilege is not a moral judgment but a technical description of global infrastructure asymmetry. Barry Eichengreen defines it as a situation where one state provides the world's reserve currency, and the rest—lacking an alternative—must play by its rules. The dollar is the universal language of finance and the default refuge in times of panic. This article explores the nature of this systemic advantage, why competitors like the euro or renminbi struggle to overtake it, and how technology and US domestic policy are shaping the future of global money.
Foundations of Power and the Dollar as a Safe Haven
The US issuance privilege consists of two elements. The first is seigniorage, the profit from the difference between the cost of printing a banknote and its purchasing power. The second, and far more important, is lower debt financing costs. This stems from global demand for US Treasuries, for which investors pay a "convenience yield"—accepting lower returns in exchange for ultimate liquidity and safety.
The 2008 crisis paradoxically strengthened the dollar. Although the fire started in the US, the world fled to American assets, confirming their status as a safe asset. The system rewarded the issuer that caused the turbulence with liquidity because its "hospital" was the largest. However, the greatest threat to the dollar is not rivals, but internal US polarization and a declining ability to maintain fiscal credibility. Exorbitant privilege is a vote of confidence that can be lost through one's own political dysfunction.
Structural Barriers for the Euro, Renminbi, and SDR
The euro, often called a "currency without a state," suffers from a lack of unified fiscal sovereignty. In crisis situations, procedural paralysis and the need for tedious negotiations between nations discourage the market, which expects immediate decisions. Conversely, the renminbi is a "currency with too much state." Capital controls and the unpredictability of the Chinese decision-making center mean the world does not trust it as a safe haven for reserves.
Existing technocratic alternatives, such as SDRs (Special Drawing Rights), remain merely the IMF's "accounting money." They lack a monetary society and a deep private market. International money requires widespread recognition and immediate convertibility in the heat of a crisis, which SDRs do not offer. Consequently, central banks are diversifying reserves slowly, finding no real substitute for the dollar with comparable institutional density.
BRICS, mBridge Technology, and Business Challenges
A common BRICS currency remains largely geopolitical rhetoric. Official statements from India, South Africa, and Russia confirm that the bloc is focusing on settlement infrastructure (national currencies, pilots) rather than a single currency. Projects like UNIT, proposed by private firms (e.g., on the Cardano blockchain), fail to gain traction because technology cannot replace a sovereign guarantor and lender of last resort.
Real change is occurring at the level of payment "rails." Systems like mBridge (based on CBDCs) allow the dollar to be bypassed in transaction settlements, leading to polycentrism. For business, this means managing risk in a world of multiple standards. Companies must hedge not only against exchange rates but also against sanctions and operational risks. Stability without a single hegemon is possible thanks to technology that lowers coordination costs, but it requires market participants to be more vigilant and ensures the interoperability of treasury systems.
Summary
The future of the dollar is not set in stone but is shaped by the dynamics of global trust and institutional stability. US dominance today stems more from a lack of alternatives than from its own extraordinary strength. In an era of monetary polycentrism, will coordination be maintained without a dominant hegemon, or are we facing an era of a monetary Tower of Babel? Or perhaps the inevitable tension between global coordination and local politics will prove to be the driver of innovation, leading to the emergence of new, more resilient financial systems?
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