Hanno Lustig on Dollar Dominance, Dollar Safety, and the Global Financial Cycle

Hanno Lustig is a professor of finance at Stanford University, and a senior fellow at the Stanford Institute for Economic Policy Research. Hanno joins David on Macro Musings to discuss his work on dollar safety, safe assets, convenience yields, and more. More specifically, Hanno and David discuss the dollar dominance in global financial markets, how the US’s status as the world’s safe asset provider reinforces its exorbitant privilege in money markets, whether the countercyclical demand for safe assets can help explain why US inflation has been so low this past decade, how years of low interest rate policy might have contributed to the growing wealth gap, and much more.   Transcript for the episode can be found here.   Hanno’s Twitter: @HannoLustig Hanno’s Stanford profile: https://www.gsb.stanford.edu/faculty-research/faculty/hanno-lustig   Related Links:   *Dollar Safety and the Global Financial Cycle* by Zhengyang Jiang, Arvind Krishnamurthy, and Hanno Lustig https://www.gsb.stanford.edu/faculty-research/working-papers/dollar-safety-global-financial-cycle   *Mind the Gap in Sovereign Debt Markets: The U.S. Treasury basis and the Dollar Risk Factor* by Arvind Krishnamurthy and Hanno Lustig https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3443231   *Manufacturing Risk-Free Government Debt* by Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh, and Mindy Z. Xiaolan https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3646430   *US Government Debt Valuation Puzzle* by Zhengyang Jiang, Hanno Lustig, Stijn Van Nieuwerburgh, and Mindy Z. Xiaolan https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3333517   *The Fiscal Theory of Price Level with a Bubble* by Markus K. Brunnermeier, Sebastian A. Merkel and Yuliy Sannikov https://www.nber.org/papers/w27116   *Debt As Safe Asset: Mining the Bubble* by Markus K. Brunnermeier, Sebastian Merkel, and Yuliy Sannikov https://scholar.princeton.edu/markus/publications/debt-safe-asset-mining-bubble   *The Safety Trap* by Ricardo J. Caballero and Emmanuel Farhi https://www.nber.org/papers/w19927   *Financial and Total Wealth Inequality with Declining Interest Rates* by Daniel Greenwald, Matteo Leombroni, Hanno Lustig, and Stijn Van Nieuwerburgh https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3789220   *The Saving Glut of the Rich* by Atif Mian, Ludwig Straub, and Amir Sufi https://scholar.harvard.edu/straub/publications/saving-glut-rich-and-rise-household-debt   David’s blog: macromarketmusings.blogspot.com David’s Twitter: @DavidBeckworth