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The dollar proved remarkably stable during the financial crisis despite a persistent US current account deficit. However, global imbalances may have played a role in the financial turmoil by explaining why long-term interest rates remained low for a prolonged period, fueling demand for toxic assets. Contrary to this view, we believe that property-related and structured assets bubbles are mainly due to intrinsic instability in financing. Questions over the dollar’s stability remain acute. The so-called Bretton Woods II system is fragile, as shown by the recent financing of the US current account deficit. Better coordination of macroeconomic policies is needed if we are to avoid undesirable instability in the exchange rate market.