By Howard Schneider
The Washington Post
WASHINGTON — For South Korea, the prescription was a "tough medicine" of budget cuts and bank closings. For Argentina it was a "tough . . . but very necessary" overhaul of government policy. And for Mexico and a host of Latin nations, the formula was debt relief in exchange for a turn toward U.S.-style market economics.
When countries get into trouble with spending and debt, the United States is never shy about giving advice or about using its financial clout to enforce it.
The rest of the world has no such leverage over the United States as it careens toward a Thursday deadline and possible sovereign default.
Even as it puts other countries at risk, the United States is able to behave as it does because of the dollar's privileged status as the world's main reserve currency. The dollar and the mammoth market for securities issued by the U.S. Treasury serve a number of roles in the world economy — functioning for some as a safe investment, for others as a money management tool to stash excess cash, for others as a broadly accepted means of exchanging goods and services.
Other types of money can serve those roles. The euro is widely accepted in trade finance, for example, and Swiss bonds are considered as safe as those issued by the U.S. Treasury. But the United States is the only country with a large enough market, a freely traded currency and sound enough credit to absorb virtually any amount of money that the global financial system demands.
The paradox: That also means there are fewer constraints on its leaders.
Just ask former Italian premier Silvio Berlusconi, forced from office in 2011 over that country's budget problems by the same sort of outside pressure missing from the current U.S. debate.