About the authors v

Acknowledgements vii

List of conference participants x

Foreword xvi

Executive summary 1

1 Global imbalances 7

  1.1 Introduction 7

  1.2 Measuring the balance of payments 11

  1.3 Patterns of imbalances 16

  1.4 Should we be concerned? 34

  1.5 Concluding thoughts 46

  Appendix to Chapter 1 47

2 The future of global currency dominance 53

  2.1 The current dominance of the dollar 54

  2.2 Factors underpinning dollar dominance 57

  2.3 Developments since Liberation Day 58

  2.4 On-going threats to dollar dominance 66

  2.5 Does the dominant dollar confer exorbitant privilege? 69

  2.6 Prospects for an expanded international role for the euro 75

  2.7 The expanding global role of the renminbi 81

  2.8 Scenarios for a more balanced multi-polar currency world 87

3 Financial stability: How global liquidity evolved – and what it means for today’s financial stability 93

  3.1 What is global liquidity? 95

  3.2 The Great Rotation: From private to public credit 97

  3.3 Treasury market plumbing and the dollar centrality 104

  3.4 The dollar system’s “Hotel California” 117

  3.5 Beyond hedging: Dollar credit and the real economy 127

  3.6 Euro area and Japanese sovereign bond markets 133

   3.7 From the old macro trilemma to the new market-based trilemma 136

  3.8 Tokenisation and the future of global liquidity 142

  3.9 Concluding remarks 144

4 The geopolitics of imbalances: Size, power dynamics, and the legacy of past crises 151

  4.1 The revival of manufacturing as a geopolitical tool 155

  4.2 Policy preferences and the persistence of imbalances 164

  4.3 The geopolitics of reserve currencies and global financial flows 166

  4.4 Imagining the future: The world in 2036 169

Discussions 174

References 211