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Biography of  the Dollar
by Craig Karmin
Crown Business, HK$208
The buck stops here, the buck stops there, the buck stops everywhere. That last play on the famous saying is the theme of  this book, which  invites a sober rethink of what most people take for granted - that the  US dollar is somehow invincible or, at least, has such a commanding sway over international business that it is unlikely to collapse.
What,  the book asks, would happen if the dollar really did collapse? Craig Karmin argues with some force in his fascinating book  that since the US abandoned the gold standard in 1971, the value of the dollar has been based more on blind faith in the US than on secure value, and that not only has confidence in the US been steadily eroding  over the years, but that it is likely to weaken to the point where another currency or other currencies - the euro, yen or yuan - could eventually dominate.
Karmin, an analyst for the Wall Street Journal, is no scaremonger and his scenario is certainly not financial armageddon, but his warning that the US dollar is not invincible should not be taken lightly.
Those who have travelled widely will know that although local currencies are good for the cheers and the beers, when it comes to the serious stuff  the greenback is the only game in town, especially in developing countries.
Karmin paints a graphic example of 'dollar apartheid' in the former Soviet Union. 'A visitor to Moscow in the middle of that decade,' he  writes, 'would find that roubles were fine for buying toilet paper at the corner store or purchasing a ticket for the metro. But the prices at the city's nouvelle French restaurants and the cover charge at trendy nightspots were settled in dollars.'
The book opens with a dollar meltdown scenario from Dutch TV in 2005 that is reminiscent of the scary 1938 radio adaptation of H.G. Wells' War of the Worlds. In the TV drama, the dollar plunges as trading opens in Europe, leading to a spiralling lack of confidence. Oil producers switch to the euro, with the result that in just 24 hours the buck has become all but worthless. With both currencies in flux, a man in Amsterdam ends up paying for a taxi journey with three packets of cigarettes. It may have been just a drama, but some viewers thought it was real, rushing to the cashpoint to withdraw their money before it was too late.
Karmin argues that the scenario is far from unthinkable, although he adds that any collapse of the dollar is likely to happen over a longer period. Even with currencies like the euro lurking as pretender to the currency throne, global banks and markets don't switch their allegiances overnight.
But as he was writing the book last year, 'the dollar's daily trading declined and the growing anxiety about its international position was shaping up'. And this was way before the US subprime crisis hit.
Karmin argues that although the dollar's international dominance has bestowed enormous privileges on the US, it also now carries a hefty risk, and the chapter  in which  he clearly spells  that out is the one on the role of the dollar in Asia following the financial crisis of 1997-98.
Focusing on South Korea, Karmin tells how, following the collapse of their currencies in the great crash, Asian countries saw the need to shore up their foreign-exchange reserves, mostly in US dollars. This, he says, gives them enormous power over the dollar market to the point where alarm bells ring at the slightest sniff of 'diversifying' from the dollar to another currency.
He writes: 'The term 'diversification' has become a buzzword ... for dumping dollars in favour of other currencies, like the euro or yen.'
'The stability of the almighty dollar could be propped up or brought down by countries that are already reassessing whether holding so many dollars is still in their best interest,' Karmin writes.
A book devoted to the history and development of a currency could well be at best a specialist read and at worst a dull one. Fortunately,  Karmin's book is neither.
By combining history and analysis with interviews and examples of the mighty buck at work,  his guide is both informative and entertaining. And with  a sense of threat rising from every chapter, there's enough of the intrigue behind global finance to add a touch of the thriller.



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Biography of the Dollar