HOUSE OVERSIGHT 026642 does not imply that there will be a demise of the dollar, or that fewer people in the world would speak English in protest. If anything, I'm worried that a sharp rally in the dollar could trigger another financial crisis in EM... Don't get me wrong, I do not believe the dominance of the dollar is good for the global financial/monetary system. But it is a trend that is difficult to reverse, unless the structural integrity of the EUR is enhanced, and the foundations of the RMB market are improved. Increasing returns to scale have made English/dollar popular, and it will be increasingly difficult to challenge their roles as the world internationalizes. (5) The BIS recently published an interesting and important paper (`The Dollar, Bank Leverage and the Deviation from Covered Interest Parity,' by H.S. Shin et al., BIS WP 592) on how a stronger dollar could lead to a tightening in lending conditions in the rest of the world, including EM. ' 111 he value of the dollar plays the role of a barometer of risk-taking capacity in capital markets. In particular, it is the spot exchange rate of the dollar which plays a crucial role... [7] he strength of the dollar is a key determinant of bank leverage... Our results point to the financial channel of exchange rates, through which fluctuations in the strength of the dollar set in motion changes in capital market intermediation spreads that respond at a high frequency._ [Ili is when the domestic currency appreciates, financial conditions in that country loosen, and CIP deviations narrow... [A] strengthening of US dollar has adverse impacts on bank balance sheets, which, in turn, reduces banks ' risk bearing capacity.' The findings of this paper are consistent with two of the points made above, that we may re-enter a phase that is not that positive for EM currencies and that the dominance of the dollar as an international currency is having unintended consequences for the rest of the w