by Wolf Richter
Declining Hegemony. But still Hegemony.
Other countries have huge trade surpluses, which bolster their financial system and economy. The US has huge trade deficits and huge budget deficits and a ballooning public debt, and businesses carry an enormous pile of debt, but the economy and financial system are propped up by the US dollar’s role as the dominant global reserve currency – a currency that every central bank must hold in large amounts. There has been speculation that this status is threatened, and there have been suggestion that the dollar would collapse soon, or whatever. So how did the dollar do as global reserve currency during the turmoil in the second quarter?