US President Donald Trump’s relentless attacks on Federal Reserve Chair Jerome Powell, together with his destabilizing foreign policy — notably the seizure of Venezuelan President Nicolas Maduro and subsequent threats to bomb Iran and invade Greenland — have called into question the entire postwar international order, including the dominance of the dollar. There has never been a more appropriate moment to reflect on the dynamics that have kept the international monetary system relatively stable over the past half-century.

Stability has persisted despite a fundamental asymmetry inherent in the dollar’s role as a global reserve currency: To supply the world with dollar liquidity, the United States must run a current-account deficit, buying more from abroad than it sells.

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