return premium

dollar bill

The financial drawbacks of being an emerging economy

NEW YORK | By Markus Jaeger via Deutsche Bank Research | The US today, like Britain under the gold standard, acts as the world’s banker. It is the most important source of international liquidity, leading countries to hold USD-denominated assets. Not only does this allow the US and especially the US Treasury to tap into a large investor base ready to finance current account and fiscal deficits at a lower cost. To the extent that the demand for international liquidity and USD assets exceeds the US balance-of-payments deficit, it allows the US to recycle short-term foreign liabilities into long-term assets.