The Times has the latest warning about how terrible it would be if the dollar ceased being the world’s reserve currency. Nouriel Roubini describes the benefits of the current situation:

We have reaped significant financial benefits from having the dollar as the reserve currency. In particular, the strong market for the dollar allows Americans to borrow at better rates. We have thus been able to finance larger deficits for longer and at lower interest rates, as foreign demand has kept Treasury yields low.

But is this really a benefit? It simply means that our increasingly feckless government (the elected representatives of our increasingly feckless people) have an easier time spending money we don’t have. Having the Euro or the Yuan or something else be the global reserve currency seems like it would make it a lot harder to finance multi-trillion-dollar deficits (otherwise we’ll be talking about quadrillions before I punch my ticket). Basically, being the reserve currency allows you to easily support gargantuan deficits, but if you do, you undermine the conditions that make for a reserve currency. To paraphrase Franklin, “a reserve currency, if you can keep it.”