| Death Cometh for the Greenback
Stiglitz, Joseph E.
The National Interest, November/December 2009, #104, pp50-60
"America's debt-to-GDP ratio is slated to increase from 40.8 percent in 2008 to 70 percent or more by 2019, and if interest rates return to more normal levels of say 5 to 6 percent from their current range of 0.0 to 0.25 percent, it will mean the cost of paying interest on the debt will eat up a substantial fraction of tax revenue (20 percent or more) - unless taxes are raised. The demand for a currency is based on the return to holding the asset relative to other assets, e.g., the interest rate received from a dollar asset, like a Treasury bill, plus the expected capital gain or loss. There are only two questions: will the movement away be orderly or disorderly, and will America play a part in shaping the new system that will emerge? I believe that the transition to the new system will be smoother and that both the United States and the world will benefit if we stop putting our heads in the sand and help create the worldwide reserve system that the globalization of financial markets requires."
Joseph E. Stiglitz is University Professor at Columbia University. He served as chief economist of the World Bank from 1997 to 2000.
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B9/01-10 - Posted January 28, 2010
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