China's Currency Games Have Been Helping, Not Harming, the Dollar

It is the exorbitant privilege of the United States that it can conjure the world’s primary reserve currency, Valéry Giscard d’Estaing, then French finance minister and later president, remarked half a century ago. This privilege, maintained as the dollar took the place of gold, allows the United States to be deeply indebted to the rest of the world while earning far more income abroad than it pays out in interest. Less well known is the mirror image of the exorbitant privilege, what we call the exorbitant detriment. It is, not surprisingly, borne by the world’s largest holder of U.S. debt: China.