The international monetary system and the United States' "exorbitant privilege”: From US Treasury debt to GAFAM

The international monetary system has traditionally revolved around US Treasury debt. As this debt is the world's reference risk-free asset, the United States' ability to provide this asset to the rest of the world enabled it to easily finance the "twin deficits", the fiscal deficit and the external deficit. But non-resident purchases of US Treasuries have gradually decreased, and what the United States is selling to the rest of the world is now increasingly US equities, in particular shares of tech companies (GAFAM). The United States no longer provides the rest of the world with reference risk-free debt, but increasingly with reference equities, which dissociates the financing of the fiscal deficit (increasingly domestic, given the Federal Reserve's role) from the financing of the external deficit (carried out through non-resident purchases of US equities). The United States’ “exorbitant privilege” is therefore increasingly due to its ability to sell equities to the rest of the world. A technology sector crisis in the United States (for example, a questioning of the sector’s monopoly rents) would reduce the wealth of US and non-resident owners of shares in this sector and also generate a balance of payments crisis in the United States, whose external deficit could no longer be financed.