The international dollar standard is an accident of history that greatly facilitates international trade and exchange. But erratic U.S. monetary and financial policies, have upset the U.S. and a world economy thus makes foreigners unhappy. Paradoxically, the asymmetrical nature of the dollar standard also makes many Americans unhappy because they cannot control their own exchange rate. Although nobody loves the dollar standard, it is a remarkably robust institution that is too valuable to lose and too difficult to replace. Rehabilitating the unloved dollar standard by “internationalizing” American monetary and financial policies to better stabilize the U.S. (and world) economies is the only way out of the current impasse.

Professor Ronald McKinnon is the William D. Eberle Professor of International Economics at Stanford University. His area of expertise is international economics and development finance, with a recent focus on China. He was awarded honorary professorships in five Chinese universities, and his work has been translated into Chinese. He has published numerous books that have been translated into many different languages. His latest book Exchange Rates under the East Asian Dollar Standard: Living with Conflicted Virtue was published by MIT Press in 2005. Professor McKinnon has been a consultant to the World Bank and International Monetary Fund.