The Dollar’s Days as Reserve Currency are Numbered

As the International Monetary Fund and World Bank redouble their warnings on the prospects for global growth, central banks continue to flood the markets with liquidity. The US Federal Reserve began its third round of quantitative easing last month; the European Central Bank is offering unlimited purchases of bonds of troubled eurozone countries. The People’s Bank of China, responding to slowing growth, has cut interest rates repeatedly and trimmed reserve requirements.

It may seem a strange time to worry about a shortage of global liquidity. But precisely this risk looms and, if nothing is done, it will threaten 21st-century globalisation.

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