Roubini vs. Zhou on the U.S. Dollar and the Chinese Yuan

By Andrew Batson

Originally posted on China Journal.

New York University economist Nouriel Roubini, in an op-ed piece Thursday, tackles one of the topics of the moment: the U.S. dollar’s status as the world’s undisputed reserve currency (the greenback is unique in that it is widely used outside U.S. borders as a currency for trade, and is the default currency for many of the world’s investors).

It’s interesting that Roubini – highly regarded these days because of his prescient warnings about the U.S. financial system– repeats many of the same arguments that China’s central bank governor, Zhou Xiaochuan, made in his proposal to end the dollar’s reserve status. But Roubini casts them in a somewhat different light.

“Having commodities priced in dollars has also meant that a fall in the dollar’s value doesn’t lead to a rise in the price of imports,” Roubini says. Yet the converse is also true, as Zhou pointed out in his essay: since the dollar is a reserve currency, it is harder for the U.S. to devalue its currency to support exports and help its economy recover.

more in:
http://blogs.wsj.com/economics/2009/05/14/roubini-vs-zhou-on-the-us-dollar-and-the-chinese-yuan/