Sample Download
Mailing List
Biography of the Dollar Blog
Bloomberg.com:
Dollar R.I.P.: ‘Biography’ Tracks Life, Predicts Grave Decline
Review by James Pressley
March 7 (Bloomberg) — Early in his “Biography of the Dollar,” Craig Karmin sits down with John Taylor, the chairman of FX Concepts Inc., a New York-based hedge fund that manages $12 billion in currencies. It was the middle of 2006, and FX Concepts was betting the dollar would rebound.
“The name of the game is to walk as close to the cliff as possible,” Taylor told Karmin. “Stopping before the edge of the cliff costs you money.”
So does tumbling into the abyss. That November — somewhat earlier than planned — Taylor and his colleagues changed course, becoming what he called “big-dollar bears.”
The U.S. currency keeps plumbing record lows. It now costs more than $1.50 to buy one euro, compared with about $1.25 in mid-2006. The timing is auspicious for Karmin’s whirlwind tour of how the dollar “conquered the world and why it’s under siege.”
Don’t be put off by the title, which echoes a flurry of recent “biographies” of inanimate objects. (There’s one on the Bible, and another on the digit zero. “Jerusalem: The Biography” is in the works.)
In Karmin’s case, the label makes some sense. For what he does is to trace the birth, maturation and widely predicted decline of the almighty buck as the world’s currency of choice. The dollar, like the U.K. pound before it, is hardly immune to challengers.
“Economists see the euro, and eventually the Chinese yuan, playing increasingly important roles in the global economy, chipping away at the dollar’s dominance,” writes Karmin, a Wall Street Journal reporter.
Undisputed Champ
For decades, the dollar has been the undisputed champ. It plays a part in almost 90 percent of all trades in the more than $3.2 trillion-a-day foreign-exchange market, as Karmin writes. The dollar accounts for almost two-thirds of the world’s central- bank reserves. Commodities from soybeans to oil are priced in it.
The dollar has, in effect, become the financial world’s software operating system — the Microsoft Windows of money.
“There is a clear benefit of easy communication when we’re all on the same system,” Karmin explains. The ubiquity of the dollar makes it cheap and easy to use.
The dollar’s death is hardly imminent, Karmin says: Any transition to a new world standard is likely to be gradual, as was the shift away from the pound.
Writing in the breezy voice of a Journal feature, Karmin takes us on a trip around the globe to show how pervasive the dollar has become. We travel to Ecuador, which scrapped its own currency, the sucre, for the dollar in 2000. Picture barges of U.S. coins chugging south and chartered flights airlifting more than $100 million in paper notes out of Miami.
The ‘D’ Word
Moving on to Seoul, we enter the Bank of Korea, a granite building modeled on a 16th-century French castle. This central bank has stockpiled so many dollars that it can drive down the currency just by uttering the word “diversification.” (Translation: The bank may dump dollars.)
Back in Washington, we tour the U.S. Bureau of Engraving and Printing, where the presses run around the clock five days a week (or more), churning out some 9 billion notes a year. At one point, Karmin finds himself holding two shrink-wrapped “bricks” of $100 bills totaling $800,000.
In the bureau’s Mutilated Currency Division, employees use scalpels and tweezers to pick through dollars that have been charred, chewed or put through a shredder. If they can verify that at least 51 percent of a mangled bill is genuine, the bureau will refund the owner.
Though some profile subjects become caricatures, it’s hard to imagine a more entertaining book on such a vital subject.
The dollar’s role as the world’s primary reserve currency has given Americans what French President Charles de Gaulle once called an “exorbitant privilege,” allowing the U.S. to run up foreign debts and trade deficits.
If you want to know what will happen when the U.S. loses that privilege, read this book.
“Biography of the Dollar: How the Mighty Buck Conquered the World and Why It’s Under Siege” is from Crown Business (263 pages, $25.95).
(James Pressley writes for Bloomberg News. The opinions expressed are his own.)
To contact the writer of this review: James Pressley in Brussels at jpressley@bloomberg.net.
The Economist:
A MAN’S angry wife once ran $30,000 of his life savings though a paper shredder. Fortunately the nest-egg was in dollars and help was at hand in a little-known corner of America’s federal bureaucracy. Since 1862 the Mutilated Currency Division of the Bureau of Engraving and Printing has pieced together partially destroyed American currency. So long as 51% of a bill remains and can be proved genuine, Uncle Sam will refund its full value.
With magnifying glasses, tweezers, scalpels and many gallons of disinfectant, the mutilated-currency specialists can spend up to two years analysing a single bill. “We don’t care if it was in a fire, buried underground or water-damaged,” says one. “Maybe your dog ate it. Came out the other end. Clean it up a bit. We’ll take care of it.” In 2006 the currency forensics handled about 20,000 cases and sent out cheques worth $66m.
This tale is one of the many fascinating titbits that Craig Karmin, a reporter for the Wall Street Journal, has compiled in his “biography” of the dollar, a book that tells the story of America’s national currency. The approach is partly historical. Mr Karmin describes the dollar’s wild youth. In the era of free banking between 1837 and 1863, for instance, more than 700 banks could issue their own notes, and as many as one-third of all bills were fake. He documents the greenback’s gradual rise as an international currency after the creation of the Federal Reserve in 1913, and its global dominance after the second world war.
A dash of analysis is thrown in too. Mr Karmin explains how the dollar’s hegemony fostered global prosperity but also enabled America to run up large external deficits—and describes the threat these deficits pose to the dollar’s role, as well as the rise of challengers like the euro.
But his book is neither a definitive history nor a triumph of economic analysis. It is a series of lively stories, full of first-hand reporting, deftly woven together. You meet the hedge-fund honcho whose firm is one of the world’s biggest currency-trading specialists; the Ecuadorean hotelier who had to change everything after his country dollarised; the president of an online bank that offers Americans foreign-currency accounts. Mr Karmin has not written an important book about the dollar but he has written a jolly entertaining one.
The Author
Craig Karmin has been a reporter with The Wall Street Journal’s Money & Investing section since 1999, where he has covered the foreign stock markets, the currency market and institutional investors, like pension funds and endowments.
Mr. Karmin, who received his BA and Masters degrees from the University of California, Berkeley, previously worked for the Dow Jones Newswires in New York, The Hill newspaper in Washington DC. and as a freelance writer in Prague.
His work has also appeared in Barron’s, Newsweek International and The New Republic. He lives in New York City with his wife and daughter.
Booklist:
Craig Karmin, reporter for the “Money and Investing” section of the Wall Street Journal, traces the history of the almighty dollar from its beginnings in the early nineteenth century as a hodgepodge of U.S. regional bank notes to the de facto powerhouse of world trade in the latter twentieth century, and he examines the future of the dollar as the reigning currency of choice in the global economy. He goes from the daily routine of a currency trader who shuffles $20 million worth of positions with the click of a mouse to the hidden world of professional counterfeiting and the creation of sophisticated security features designed to thwart such activity. In the inner workings of the Bureau of Engraving and Printing, artisans still carve master plates with scalpels while enormous presses run nonstop, churning out $500 million worth of Federal Reserve notes per day, which often end up being stockpiled by foreign interests rather than in the hands of U.S. citizens. This remarkable historical, political, and economic examination of the dollar raises many concerns for all stakeholders in America’s future.
— David Siegfried