It’s Good To Be The King
From The Economist’s Free Exchange blog, the Brits are learning that you can’t play the King when you’re only a Duke:
Do not do as America does, unless you are a very big country (or economic bloc). That seems to be the lesson Britain is learning as the pound weakens and confidence in the credit worthiness of the country slips. If you have a global reserve currency, if private demand for your debt is strong, if the flight to safety means that government borrowing costs remain low no matter how profligate the central bank, well, then you can do as America has done. If not, better prepare to have your capital dubbed “Reykjavik-on-Thames”.
I don’t think many Americans understand the fortunate position our currency holds in the world. I don’t think they understand that we’ve been taxing the world for decades, but that the world is so intertwined with our monetary system that we’re the de facto “gold standard” of the world.
Hopefully for America, the rest of the world doesn’t wise up and realize the tribute they’ve been paying. I think it’s too late, though. Even if they realize it, they [and we] are still screwed.