Michael Pettis, a Beijing-based finance professor and humble seer, argues that the U.S. is paying a high price for propping up the dollar as the world’s reserve currency, a decidedly contrarian argument:

Conspiracy theory notwithstanding, claims that the reserve status of the dollar unfairly benefits the US are no longer true. On the contrary, it has become a burden, both for America and the world.
During the first few decades of the post-war period, the cost of maintaining the dollar’s status could be justified by the incremental benefits to the US of a stable and growing world economy, within cold war constraints. But beginning in the 1980s, trade policies abroad have sharply raised the cost to the US, while the end of the cold war has limited the benefits.

Basically, other countries, particularly in East Asia, have pursued export-oriented development strategies that rely on stockpiling dollars, which forces the U.S. to maintain a large current account deficit:

This importing of US demand by other countries forces the US economy to respond in one of two ways. Either American unemployment must rise as demand is diverted abroad, or Americans must counteract the employment impact by increasing domestic consumption or investment.

Pettis also argues that the supposed benefits of reserve currency status — lowering the cost of imports and the cost of government borrowing — are overrated. On the imports front, Pettis argues that we overconsume and that lower consumption costs aren’t worth lower employment levels. On lower the cost of government borrowing, he counters that reserve currency status increases borrowing, making it harder for the public sector to finance itself more cheaply.

Shifting to a multi-currency model will, Pettis suggests, force East Asian exporters to rebalance their economies, a feat that multilateral hectoring has failed to accomplish. I find Pettis’s take convincing. I wonder how we’d get from Point A to Point B.