那提西银行-全球-金融业-美元的“超高特权”是否还存在？-20171212-7页_595kb

Flash Economics Summary: Does the Dollar's "Exorbitant Privilege" Still Exist?

Core Content

This document explores the concept of the dollar's "exorbitant privilege", which refers to the United States' unique ability to attract foreign capital, particularly to its Treasury debt market. This privilege is attributed to the US dollar's role as a global risk-free asset and a universal store of value. Despite various challenges, including the emergence of the euro, low interest rates, rising public and external debt, and the decline in the US's global economic weight, the analysis concludes that the dollar's exorbitant privilege remains intact.

Main Points

• Definition of Exorbitant Privilege:
  The US can maintain a perpetual external deficit without negative consequences due to continuous capital inflows. These inflows also allow the US to finance corporate investments abroad.

• Key Factors Affecting the Privilege:
  Several factors could potentially erode the dollar's exorbitant privilege:

  • The rise of the euro as a second reserve currency.
  • Low dollar interest rates, making US debt less attractive compared to other currencies.
  • The increase in US public and external debt ratios.
  • The decline in the US's share of the global economy.

• Evidence of Continued Privilege:
  Despite the above factors, the US dollar remains the dominant currency in global foreign exchange reserves, holding 64% to 65% of the total (as of 2017), similar to its share in 1998.

  • Non-resident purchases of US Treasuries have remained high, even with fluctuations due to events like the loss of foreign exchange reserves in China.
  • The weight of non-residents in US public debt holdings has continued to increase, indicating strong foreign demand for US debt.

Key Information

• Chart 1: Demonstrates the US's ability to maintain an external deficit without adverse effects due to capital inflows.
• Chart 2: Shows the relationship between US gross external debt in bonds and gross external assets in direct investments and equities.
• Chart 3: Highlights the decline in dollar interest rates, which may reduce the attractiveness of US debt.
• Chart 4A and 4B: Reflect the increase in public and external debt ratios.
• Chart 5: Indicates the decline in the US's global economic weight.
• Chart 6: Reveals that non-resident Treasury purchases remain high, despite short-term dips.
• Table 1: Provides a breakdown of foreign exchange reserves by currency, showing the persistent dominance of the dollar.
• Table 2: Tracks the percentage of US public debt held by non-residents, which has increased over time.

Conclusion

• The dollar's exorbitant privilege is still present, despite the challenges mentioned.
• The US continues to attract significant foreign capital, ensuring stable external financing and supporting international investments.
• Political risks in the US have not impacted the privilege, as no significant developments have been observed in this regard.

Disclaimer Highlights

• The document is intended for professional and qualified investors only.
• It is strictly confidential and not a personalized investment recommendation.
• The information is not updated after the document's date and should not be relied upon for current decisions.
• No liability is accepted for the accuracy or completeness of the information.
• Natixis is supervised and regulated in various jurisdictions, including France, the UK, Germany, Spain, and Italy.

Legal and Regulatory Notes

• The document is subject to legal restrictions depending on the jurisdiction.
• No financial analysis is provided, and it does not meet legal requirements for independent investment research.
• The views expressed are personal and may differ among authors.
• No compensation is linked to the recommendations or views in the document.

Final Note

The analysis concludes that while the dollar's exorbitant privilege faces challenges, it remains a dominant force in the global financial system, ensuring the US's continued ability to finance its deficits and support international investments.