ABSTRACT
Ever since the end of World War II the international monetary system has been centered on the dollar as the principal form of world money. The widespread use of its currency as an international medium of exchange has given the United States a special position in the world economy. On the one hand, we Americans have had to supply the rest of the world with adequate supplies of global liquidity. This responsibility has included lender-of-last-resort interventions to help other countries with excessive external deficits and debt-servicing problems, as evidenced by the dominant U.S. role in funding the IMF or in managing the LDC debt crisis. On the other hand, the United States has derived significant advantages as an issuer of world money, being the only country that can pay for its obligations to other countries in its own currency. One consequence of this so-called seigniorage benefit is the ability to run continuous balance-of-payments deficits that are automatically financed by foreigners willing to hold additional dollars (see the last two sections of chapter 5).
