| | November 20189CIOReviewmilitary spending, non-tariff barriers to trade and the like, that American leaders have often discussed but have not pressed as hard as Trump. The so-called traditional security alliances, like NATO, is not needed. Russia does not pose the threat it once did. There is a certain realism expressed. As opposed to Wilsonian idealism, which in George W. Bush's national security strategy was expressed as the desire not just to make the world safer but better, Trump is primarily and maybe exclusively interested in economic well-being. He shows little interest in human rights promotion or advancing democracy. Three major factors that explain the dollar's role in the world economy. First is inertia, like our QWERTY keyboard, it is there. An alternative would have to be better not just as good. For many decision makers, holding on to dollars is less complicated than shifting to something else. At present, and for the foreseeable future, there is no compelling alternative. Second, the key to the dollar's role does not stem from the fact that oil is denominated in US dollars. The role of the dollar is made possible by the depth, breadth, and transparency of the US Treasury market, which is where the dollars in reserves are primarily invested. No other bond market can fulfill the function of US. Third, some recent academic work suggests that the military protection that the US offers many countries may also support its role as a reserve currency. Trump seems to place less emphasis on this consideration. Even though, for example, Montenegro has troops in Afghanistan and has been a target of Russia's asymmetrical warfare in allegedly supporting a coup as a NATO member, Trump has expressed dismay that the US would be obligated to defend it under Article 5 of NATO treaty (only invoked once in its history, and that was in response to 9/11). Even before the Trump Administration, some in the US Treasury Department had become more ambivalent about foreign officials buying US bonds. On the one hand, foreign buying of US bonds was needed to fund the US current account deficit. On the other hand, by purchasing US bonds, foreign central banks were resisting the upward pressure on their currencies, which ostensibly, was preventing the trade account from adjusting. The view that had already been expressed by some in Obama's Treasury that foreign countries should "buy US goods, not US bonds." The relationship among great powers if the ideological conflict is de-emphasized, the salience of economic competition were becoming more important before 2016. Trump has provided some answers. It may be muddled and poorly articulated, but there is an underlying coherence that ought not to be lost on investors. It is not just the Trump Administration that is re-imagining global competition in the post-cold war era. Russia is not content with the territorial settlement. China has prospered like few other countries over the past 40 years but is chaffing under what it sees as a unipolar world. All three great powers are not content with the status quo. It will change, but without a compelling alternative, the dollar's role seems secure for years to come. | | November 20189CIOReviewthe key to the dollar's role does not stem from the fact that oil is denominated in US dollars
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