Research this week published by the University of Toronto’s Jason Choi, the University of Wisconsin-Madison’s Rishabh Kirpalani and Duong Dang, and New York University’s Diego Perez highlights the extent of America’s ‘exorbitant privilege.’
In their report ‘Exorbitant privilege and the sustainability of U.S. public debt’ they note that this special status “increases the maximal sustainable debt by approximately 22% of GDP.”
In other words, the U.S. government can sustainably borrow as much as 22% of GDP more than it would otherwise be able to if it weren’t the supplier of the global reserve currency.