Exorbitant privilege

The exorbitant privilege refers to the alleged benefit the United States has due its own currency (i.e., the US Dollar) being the international reserve currency. Accordingly, the US would not face a balance of payments crisis, because it purchased imports in its own currency.

The term was coined in the 1960s by Valéry Giscard d'Estaing, then the French Minister of Finance. It is frequently misattributed to Charles de Gaulle, who is said to have had somewhat similar views.

Exorbitant privilege as a concept cannot refer to currencies that have a regional reserve currency role, only global reserve currencies.

Recent McKinsey Global Institute research questions whether the benefit that the US enjoys is really that exorbitant, highlighting the countervailing loss of trade competitiveness from the high dollar (that typically results from its reserve status, all else equal). The phrase became the title of a 2010 book by economist Barry Eichengreen, examining the future prospects for the US Dollar's dominance in international trade.

See also

• Demurrage
• Reserve currency
• Seigniorage