The prophecies that the US dollar will lose its situation as the dominant currency in the world has repeated decades – and its size is increasing. Current currency lovers claim that bitcoin or other Blockchain monetary units will replace the dollar. Falcons in foreign policy warn that the Chinese Rinmenbi is a deadly threat to green leather. The fanatics predicted in proper funds that fixing American debt and inflation will definitely lead to the erosion of the value of the dollar to the extent of the relationship.
But the crossbar, Paul Blossin He argues that the standard of the dollar at the top of the currency pyramid in the world is not applicable – as the United States government is mistaken. In his bookKing Dollar: The past and the future of the dominant currency in the worldandIt indicates that the superiority of the dollar stems from several factors – well, the unparalleled depth, widening, and liquidity of the American financial markets, as well as the legal and regulatory infrastructure in America.
Although other currencies have similar features and are somewhat used internationally, nothing can match the dollar. All alternatives have defects that limit their global role. The following is the story of one of the main currency – the Japanese yen – and why he failed to take the throne of the dollar.
Kaisky Dinner includes multiple courses of delicious dishes, which are wonderfully presented on handcrafted ceramic and lacquer. Armed It was about singing performance-this was a kind of hospitality that gave us the US Treasury officials who traveled to Tokyo in the 1980s for “International Yen talks”. Their hosts held high positions in the strong Ministry of Finance, which gave them their entry into the most exclusive eating institutions in the capital, all the costs covered by the accounts of the Japanese government expenses.
Despite all evening entertainment, the Americans generally found these visits frustrating. Their goal was to persuade Japan to internationalize the yen by removing heavy regulations on the country’s financial system and allowing money to move freely inside and outside the country. This point bears its repetition to ensure that it is drowned in: The US government wanted to make the yen look like a dollar; Treasury officials were not only ready to celebrate another currency playing a global role similar to the role of Greenback, but rather insisting on that.
But progress was ice. Their Japanese counterparts were skilled in strengthening American proposals with strenuous interpretations of the reason for the inability of Tokyo to take the measures that Washington wanted or why, if the implementation will continue, it must go “step by step” for several years. This usually did not help to conduct negotiations in a wonderful atmosphere, as each side was sitting against the other on long tables while dozens of novice Ministry officials were hovering along the walls and in the nearby rooms to supply their superiors with logistical support.
It was clear that patience was running out in the United States from a “step -by -step” approach in Tokyo in one session when the Undersecretary of the Treasury, Perrinkel, rejected a free Market enthusiastic with the voice of Steetori, the argument offered by the main Japanese negotiator, Deputy Minister Tomomitsu oba. “I grew up in Missouri on a dirt farm,” Sprinkel flourished, which remembered that when the pigs were born, “we had to cut their tails. When we cut it, we did not cut it with one inch at one time! This would harm them more. To laughed among his subordinates, the next day, Oba announced that he understood the story of SPRINKEL and from now on, Japan’s approach will change from “step -by -step” to “step -by -step”.
As the story indicates, US officials, who were actively encouraged by a competing currency to take over the international situation of the dollar, against a government that had no interest in escalating such a challenge. Japanese officials saw the prominent yen as a decisive element in the miracle of the economy after the war in their nation, and they hated chaos with success.
That miracle was in full swing. Toyota, Nissan and Honda invaded the American auto market in the 1970s and found it mature for the veil; Similar invasions were achieved in consumer electronics by Sony and Matsushita Electric, in computers and integrated circuits by Fujitsu and NEC, in power generation and heavy machines by Toshiba and Hitachi, and through other competing Japanese companies in a group of sectors that ranged from construction equipment to the machine. He wrote with titles like Japan number one and Trading places: How we allowed Japan to take the initiative He explained to the Americans how this nation is the poor island of resources, after it ranked second in the world’s gross domestic product classifications and accumulated the largest hideout in the world from foreign currency reserves, was on its way to challenge the United States as the dominant economic power.
To achieve such highly shipping growth, Japanese policy makers have adopted a model of development based on what economists call “financial repression”, which is the idea is to use the financial system for the benefit of manufacturers and exporters in the country. In the first quarter of the century after the war, these policies were Draconien, where dollars and other foreign currencies were carefully made to be customized by bureaucrats to obtain machines, technology and other inputs from the outside needed to build industrial power. It was very narrow restrictions on the cross -border money movements during this period until late in 1970, almost no Japanese trade bills in the yen. These regulations were somewhat diluted in subsequent years, but even in the 1980s, Japanese banks and Christians were completely limited in the amounts of money they could send abroad; The government planners wanted to obtain a large group of capital at home so that industrial companies could get the maximum financing at the lowest possible interest rates. Another aspect of this policy involves the inhibition of foreigners from buying the yen in unlimited quantities for fear that they will cause the exchange rate to rise, making Japanese goods less competing in global markets.
Washington’s tolerance of these policies was at the end of the 1980s. American manufacturers were in a state of obstacle they faced as a result of the strength of the dollar in the yen. Moreover, American banks, securities and money managers were calming to reach the financial markets protected in Japan. Under the heavy pressures of the United States to move away from its commercial practices, Tokyo agreed to the international agreement in 1984, which liberated its financial system to some extent, and during the eighties of the last century, the percentage of Japanese export in 1985 increased by the primary to ascend to ascend to ascend to what is explicit, which is what communicates with it to the rise, which is clear, which is clear. Greenback
Although these agreements helped to address grievances, the economic muscles in Japan have emerged only more than before. To face effects Endaka (Estimation of the yen) on exports, the Bank of Japan reduced interest rates to low -level levels, prompting prices to the Tokyo Stock Exchange and property in the major Japanese cities to the stratosphere. Japanese multinational companies dealt with high costs at home by converting a lot of their intensive manufacturing abroad-to North America and Europe, where their customers were; To East and Southeast Asia, where they can export its distinctive goods of low -cost production rules. This process was firmly firmly from Japan as the higher commercial partner and foreign investor for most of its Asian neighbors, giving Tokyo a degree of influence that Japanovopis found anxious. One of the evidences that more than 17,000 workers in the Malaysian Matsushita factories wore the costume of Matsushita and started their days with the company’s song and the Calithin, just as the employees did at the headquarters of Matsushta in Osaka. “Japan has created a presence in the region very quickly that talking about” Coprosphere “is already cliché,” I mentioned. Newsweek In the story of August 1991 cover, which was entitled “Sayonara, America”, she regretted that American companies were backward in an unprecedented explosion of dynamism. “This year, and for the first time since the Organization for Economic Cooperation and Development began to maintain statistics, the Asian countries of the Japanese yen bloc will generate real economic growth more than European society or common economies in North America.”
This phrase – “Elaine Block” – was widely connected, referring to a commercial area sometimes until Tokyo would likely control but also the possibility that the Japanese currency, which was freed from the restrictions of financial repression, would dominate Asia at the expense of America. The yen’s share of reserves in East Asia topped by 17 % by 1990, and the two borrowers of dollars be exceeded by those looking for foreign credit during this period. In 1995, there Foreign affairs The article “The Fall of the Dollar Order”, the diplomatic historian Diane Konz expects severe consequences: “When the yen is escalating and the yen becomes the common Pacific coin, Americans will need to sell dollars Lin to dispose of business with any Asian nation,” she wrote. “The death of the dollar matter will significantly increase the price of the American dream while breaking the American global influence at the same time.” Later that year in another Foreign affairs An article, entitled “Hegemony through Technology: Does Japan create a yen mass in Southeast Asia?” Price Waterhouse adviser Mark Taylor warned that “American companies may find themselves close to the regional economic bloc that focuses on Japan.”
This was BalllyHoo about the yen at a bad time. By the mid -1990s, the Japanese economy was drowning after the explosion of the stock bubble and property. Among the efforts of the authorities made by many desperate efforts to stimulate the economy, the “Big Bang” reform package in 1996 ended all the remaining capital controls, including other steps aimed at converting Tokyo into a financial center, as much as London did a decade ago. But Japan was unable to overcome the legacy of financial repression. The banks in the country, which they used to exposed to the Ministry of Finance, were burdened by the loans of the bubbles era that they or their strong organizers did not see them to admit that they are not paid. When seeing the banking industry that is struggling to stay on its feet, foreign financial companies have reduced their operations in Tokyo and went to other more vibrant centers than Asian financing such as Hong Kong, Singapore and Shanghai.
Even after adopting additional editing policies in 1999, the yen remained far from Ran as an international currency. It represented 5.5 % of foreign exchange reserves in 2001, as it decreased by 2016 to about 3 %, played a modest role even in Japan’s trade, as it was used in only 37 % of Japanese exports and 26 % of imports. Although Japan has envy, its growth is anemia, and it was interested in a rapidly aging society and the population is diminished, so its attractiveness did not approach again that which was alerted during the 1980s. The Bank of Japan has bought such vast quantities of government bonds in its efforts to avoid deflation, which was only a little trading in those bonds in recent years – any other reason for the relatively low -yen classification in the league league tables.
Perhaps if the Ministry of Finance officials had taken the ethics of the pig’s story in Beryl Sprinkel to the heart and dismantled their controls much before that, and the dollar users could have a strong motivation to turn into the yen. But the opportunity has been lost.
Excerpt from the king of the dollar by Paul Blossin. It was published by Yale University Press. Copyright © 2025 by
Paul Plosin. Used with permission. All rights reserved.
This story was originally shown on Fortune.com
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