Exorbitant privilege

Common card · No. 339716

The term exorbitant privilege refers to the benefits that the United States, as the world's supplier of safe assets, derives from its own currency (the US dollar) being the international reserve currency. These safe assets, primarily government debt, tend to be sold at higher prices than the debt of other governments. Exorbitant privilege enables the United States (and other states in a similar situation in history) to borrow beyond the fiscal capacity of other states. It also reduces price volatility in U.S. foreign trade, and gives the U.S. the means to impose costly sanctions on other states. The Dutch Republic had exorbitant privilege in the 17th and early 18th century. The United Kingdom had exorbitant privilege for much of the 19th and early 20th century. Around 1815, British national debt accounted for more than half of the world’s traded securities. Prior to World War I, the UK was at the center of global trade, the pound was the world's reserve currency, and the UK was the world...

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