Because about 80% of US bond and bank-loan claims on foreigners are in dollars, the exorbitant privilege is largely driven by the spread between what the US charges foreign dollar borrowers and what it pays on dollar liabilities (tied to treasury spreads); those spreads are now at their lowest in over 25 years, with a risk of going lower that would reduce the privilege.

causalpending

Speaker

Joseph Gagnon

Evidence Quote

what really drives uh that part of the exorbitant privilege is the spread between uh what we can charge foreign dollar borrowers and what we pay uh on our dollar liabilities

Source

The changing dollar regime: An updatePeterson Institute for International Economics
Created: 6/18/2026, 1:57:48 PM

My Notes

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