Economists see this depreciation as desirable and necessary to bring down America’s trade deficits. But it means that foreign investors pay a high price when they come to the United States financial markets for safety: They settle for very low yields on Treasury securities while accepting a fall in the value of their holdings as the dollar declines in value relative to their own currencies. This is a price they seem — so far — happy to pay.

Stranger still, when other currencies strengthen against the dollar, American households may have to pay more (for imported goods and for their vacations abroad) but America as a whole makes a profit: Its foreign investments are worth more (in dollars) while the dollar value of its liabilities to the rest of the world is unaffected.

Yet another paradox: In 2008, when the Fed began what would be the first of three rounds of quantitative easing — flooding the financial system with dollars — capital flowed to emerging markets, fueling inflation and asset bubbles. Indications of a gradual end to this policy have sucked money out of those markets in anticipation of rising United States interest rates. So foreign central banks have been storing money in American assets partly to protect themselves from the spillover effects of American policies themselves.

What accounts for this almost childlike faith in the dollar?

In fairness to the United States, it has a winning combination that no other country comes close to matching: not just a large economy but also deep financial markets, robust public institutions including a trusted central bank, and an effective legal framework.

Why do these institutions matter? With its massive buildup of debt, one scenario for meeting obligations to its creditors is that Washington will tolerate a burst of inflation to bring down the real (inflation-adjusted) value of its debt. Foreign investors, who hold more than half of publicly traded Treasury securities, would suffer disproportionately as they would also be hurt by the dollar depreciation that would almost surely follow.

Aren’t foreign investors concerned about this prospect? High inflation would hurt American retirees, pension funds, insurance companies and other politically powerful groups that hold government bonds — making this scenario politically difficult and therefore less likely.

Still, the frustration of the rest of the world at having no significant alternative to dollar-denominated assets is understandable. To fix that, other countries need to improve their own financial systems, making them more stable and capable of providing high-quality financial assets that foreign investors can purchase.