"But there are now few genuinely safe assets. In a world where even US government debt no longer seems risk-free, asset managers have rushed towards the second-best option: a flight to liquidity, not safety.
In that respect, America reigns supreme. Its capital markets are deep and the pool of dollars seems bottomless. Or to put it another way (though Prof Prasad, now an economics professor, does not quite say this) what is happening with the dollar turns the normal rules of economics on their head: it has become ultra-attractive because of bountiful supply, not because supply has been constrained."
The Euro should be a stronger currency because Europeans aren't wildly spending. And the ECB isn't technically responsible for member nations debts. But the markets don't care about that. They just want to make sure that when it is time to sell, that they will have a buyer. And that is where America rules the roost. Like the article says, it is about liquidity, not financial stability. And how did the dollar become so liquid? Because of profligate spending and quantitative easing. It's a paradox. The number one US export in the world is the US dollar. Our economy is screwed up, but we uniquely among all nations in the world have the ability to create a high-demand product which costs us almost nothing to produce.See also: Why the dollar reigns supreme
The Biggest Export of the United States
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