Ishwar Prasad

That is about right.

Yeah, it's a potential rival. Yeah, potential, but Brexit, when the UK left the European Union. The British economy has really struggled since then.

I mean, this is a very rich economy, but they're just not growing very much there.

And they really need exports to grow. Which means they need a weaker yen. So for them, they don't really want it.

Collectively, it's a lot. But individually, each of these reserve currencies doesn't amount to very much.

Yeah, it's, yeah, I wouldn't put that negative spin on it.

It has pretty big financial markets, so why not the euro?

To put it mildly, it's a mess.

What we learned is that the Greek government bond is not exactly as safe as a German bond.

most of China's trade with other countries was still being conducted in U.S. dollars. And the Chinese said, why the heck are we still relying so much on dollars? Why don't we and other countries get with the program and start using our currency, the renminbi, more?

People are worried about the state of the Chinese economy and its growth prospects. And they don't necessarily trust the Chinese government.

No, but of course you have to talk about gold and Bitcoin, which are on your list.

I have some right here. I got a bit of gold the other day at the tooth filling.

Carry it around with you.

Gold is certainly something that over millennia has preserved its value. There is a problem with gold, though, which is that it is not very liquid.

So from a central banker's perspective, Bitcoin doesn't look safe. Its value is very volatile and it's not liquid.

I wrote a book in 2014 called The Dollar Trap. And the point I made in that book is that there are no better alternatives. Of all the shirts hanging in the closet, the dollar seems the least muddied and least stinky one by far. This is not to say it is pristine by any means. But when you have to wear a shirt, it's the shirt that much of the world reaches for.

If the U.S. dollar were to lose its primacy, we as consumers and the U.S. government, we'd all have to tighten our belts, and that would not be such a fun day. Is that day coming? That day has been anticipated for a long time. I don't think it's coming anytime soon, and I'm not even sure it'll come within the foreseeable future at all.

For a while, at least.

Of course, I'm glad the timing worked out. And this is one of my pet subjects, so it's good.

I've been able to pay for cab rides in places like India, China, even in Italy, the land of the euro, because everybody is willing to accept dollars. That last one, Italy, actually happened recently on a family vacation. My family knew this was coming and, of course, were hugely embarrassed by the whole thing. But I told the limo driver, I'll give you dollars instead of euros.

And the limo driver was quite happy to accept dollars. If I tried this experiment in the U.S. with euros or Japanese yen or British pound sterling, I can tell you fairly confidently that they probably wouldn't take it.

One is liquidity, meaning that they should be able to buy and sell that asset easily and in large quantities without disrupting the market.

If you think about the Swiss franc, for instance, it's not a very big market. You know, Switzerland is a small economy. And if you try to buy, say, 50 or 100 billion dollars worth of Swiss government bonds and then try to sell them at one shot, it's going to destroy the market. You sell 100 billion dollars worth of U.S. treasuries. You know, this is a 33 trillion dollar market.

It's not going to register as more than a ripple.

Second, you need safety, meaning that the value of those assets is going to be preserved more or less.

But there's one other very important thing. A reserve currency issuer needs to have the trust of foreign investors. So you need good institutions. And what are those institutions? One is checks and balances. So you know that a government won't do anything crazy with its policies. Crazy like borrowing more money than it could ever pay back.

which means that the government will not change the rules at an instant and say that we're not going to pay back foreign investors. And you need an independent central bank so that you know the value of the currency is going to be preserved and the central bank will not let inflation run amok.

So those are all of the key attributes of a reserve currency. If one were looking for an ideal reserve currency, this is what you would want to have.