U.S. lawmakers' brinkmanship over raising the debt ceiling could have prompted a series of moves--the downgrading of U.S. debt by Standard and Poor's being one--that could cause a selloff of U.S. securities and an end to the primacy of the dollar, writes CFR's Francis Warnock.

In the latest Capital Flows Comment, Francis E. Warnock challenges the assumptions underlying the new consensus in favor of capital controls.

This second installment of the Capital Flows Quarterly series investigates two factors that could substantially alter the long-run value of the U.S. dollar: the dollar's reserve status and the sustainability of U.S. international debt.

The dollar's status as the world's reserve currency has become a facet of U.S. power, allowing the United States to borrow effortlessly and sustain an assertive foreign policy. But the capital inflows associated with the dollar's reserve-currency status have created a vulnerability, too, opening the door to a foreign sell-off of U.S. securities that could drive up U.S. interest rates. In this Center for Geoeconomic Studies Capital Flows Quarterly, Francis E. Warnock argues that a sell-off came close to happening in 2009. How the United States uses this reprieve will affect the nation's ability to borrow for years to come, with broad implications for the sustainability of an active U.S. foreign policy.