(June 12): The world is having serious doubts about the once widely accepted presumption of American exceptionalism.

The era of the US dollar’s “exorbitant privilege” as the world’s primary reserve currency is coming to an end. Then-French Finance Minister Valery Giscard d’Estaing coined that phrase in the 1960s largely out of frustration, bemoaning a US that drew freely on the rest of the world to support its over-extended standard of living. For almost 60 years, the world complained but did nothing about it. Those days are over.

Already stressed by the impact of the Covid19 pandemic, US living standards are about to be squeezed as never before. At the same time, the world is having serious doubts about the once-widely accepted presumption of American exceptionalism. Currencies set the equilibrium between these two forces — domestic economic fundamentals and foreign perceptions of a nation’s strength or weakness. The balance is shifting, and a crash in the dollar could well be in the offing.

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