Bringing Them All Back Home? Dollar Diminution and U.S. Power
Click to increase image sizeClick to decrease image size Acknowledgments Earlier versions of this article were presented at Tobin Project meetings on Sustainable National Security Strategy. Notes 1. Explained further in Jonathan Kirshner, American Power After the Financial Crisis (Ithaca: Cornell University Press, forthcoming.) 2. U.S. Government Accountability Office, “Financial Derivatives: Actions Needed to Protect the Financial System,” GAO/GGD-94-133, May 1994, pp. 11, 14–15, 39, 124, 126–7, www.gao.gov/assets/160/154342.pdf; Alan Greenspan, “The Regulation of OTC Derivatives,” testimony before the House Committee on Banking and Financial Services, July 24, 1998, www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm; Alan Greenspan, The Age of Turbulence (New York: Penguin Press, 2007): pp. 373–4. 3. Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (New York, Pantheon, 2010), pp. 89, 91. 4. Greta R. Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance, (Cambridge: Harvard University Press, 2011): pp. 28, 29, 39, 51; Johnson and Kwak, 13 Bankers. 5. See Carmen Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, (Princeton: Princeton University Press, 2009). 6. See Carmen Reinhart and Kenneth Rogoff, This Time is Different: Eight Centuries of Financial Folly, (Princeton: Princeton University Press, 2009). p. 155. 7. Nicholas D. Kristof and David Sanger, “How U.S. Wooed Asia to Let Cash Flow In,” The New York Times, February 16, 1999, http://www.nytimes.com/1999/02/16/world/how-us-wooed-asia-to-let-cash-flow-in.html?pagewanted=all&src=pm. 8. “International Capital Markets Charting a Steadier Course,” IMF Survey, September 23, 1996, http://www.imf.org/external/pubs/ft/survey/pdf/092396a.pdf. 9. Alan Greenspan, “The Current Asian Crisis,” testimony before the Senate Appropriations Committee, March 3, 1998; U.S. Treasury, “Deputy Secretary Summers Remarks Before the International Monetary Fund,” press release, March 9, 1998. 10. Sidney Weintraub, “Lessons from the Chile and Singapore Free Trade Agreements,” in Jeffrey Schott, ed., Free Trade Agreements: U.S. Strategies and Priorities, (Washington: Institute for International Economics, 2004): p. 87. 11. G. John Ikenberry and Charles Kupchan, “Socialization and Hegemonic Power,” International Organization 44, no. 3 (June 1990): 283–315. 12. Carl E. Walter and Fraser J. T. Howie, Red Capitalism: The Fragile Foundation of China's Extraordinary Rise, (Singapore: Wiley, 2011): pp. ix–x, 3; Rosemary Foot and Andrew Walter, China, The United States, and Global Order, (Cambridge: Cambridge University Press, 2011): pp. 117, 120, 123, 265–270; Gregory Chin and Eric Helleiner, “China as a Creditor: A Rising Financial Power?” Journal of International Affairs 62, no. 1 (Fall/Winter 2008): pp. 87 (quote), 92, 97–8, 99. 13. Li Ruogu, “The Financial Crisis and International Monetary System Reform,” China Finance 5, (2010); Li Daokui and Yin Xingzhong, “New Structure of the International Monetary System: Research on the Post-Financial Crisis Era,” Journal of Financial Research 2, (2010). 14. Zhou Xiaochuan, “Reform of the International Monetary System,” People's Bank of China, March 23, 2009; David Barboza, “China Urges New Money Reserve to Replace Dollar,” New York Times, March 24, 2009, http://www.nytimes.com/2009/03/24/world/asia/24china.html?_r=0; Gregory Chin and Wang Yong “Debating the International Currency System: What's in a Speech?” China Security 6, no. 1 (2010): pp 4, 5, 11, 12, p. 14 (quote); Zhang Yuyan, “Internationalization of the RMB: Endorse or Oppose,” International Economic Review 1, (2010); Zhang Ming, “Reform of the International Monetary System”; Zhang Yuyan and Zhang Jingchun, “International Currency's Costs and Benefits,” World Affairs 21, (2008). 15. Sebsatian Mallaby and Olin Wethington, “The Future of the Yuan: China's Struggle to Internationalize Its Currency,” Foreign Affairs 91, no. 1 (January/February 2012): pp. 136, 137; Jeffrey Frankel, “Historical Precedents for Internationalization of the RMB,” (Council on Foreign Relations, November 2011): p. 13. 16. Ming Zhang, “China's New International Financial Strategy amid the Global Financial Crisis,” China & World Economy 17, no. 5 (2009): pp. 23, 24, 27, 29, 31; Pieter Bottelier, “Future of the Renminbi as an International Currency,” ChinaUsfocus.com, April 29, 2011, http://www.chinausfocus.com/finance-economy/future-of-the-renminbi-as-an-international-currency/. 17. Chen Siqing, “Deeper-level Analysis of the Reasons for the U.S. Financial Crisis and Its Lessons for China's Banking Industry,” Studies of International Finance 12, (2008); Nancy Birdsall and Francis Fukuyama, “The Post-Washington Consensus: Development After the Crisis,” Foreign Affairs 90, no. 2 (March/April 2011): p. 3. 18. Edward Wong and Natasha Singer, “Currency Agreement for Japan and China,” New York Times December 27, 2011, http://www.nytimes.com/2011/12/27/business/global/china-and-japan-in-currency-agreement.html; “China and Australia in $31bn Currency Swap,” Financial Times, May 22, 2012, http://www.ft.com/intl/cms/s/0/4b6c4ab6-7404-11e1-bcec-00144feab49a.html#axzz2QeB9zdmx; “China and Brazil in $30bn Currency Swap Agreement,” BBC News, June 22 2012, http://www.bbc.co.uk/news/business-21949615. 19. Kosuke Takahashi, “Japan and China Bypass US in Direct Currency Trade,” The Asia–Pacific Journal 24, no. 3 (June 11 2012); Chin and Wang, “Debating the International Currency System,” p. 13. 20. The word “relative” is crucial. The most likely scenario is that the dollar will remain the world's most widely used international currency, with its use eroding to something like a “first among equals” status. But even that relative contraction in its international use will have consequences. 21. See Benjamin Cohen, “The Macrofoundations of Monetary Power,” in David M. Andrews, ed., International Monetary Power (Cornell University Press, 2006). 22. Susan Strange, “Finance, Information and Power,” Review of International Studies 16, no. 3 (July 1990): 259–74. 23. In theory, with floating rates, the “hangover” can be ignored and excess currency “mopped up” by depreciation. But in practice, states are very sensitive to sustained depreciations of their currencies, which threaten to snowball out of control. 24. Lewis Johnman, “Defending the Pound: The Economics of the Suez Crisis, 1956”, in Anthony Gorst, Lewis Johnman and W. Scott Lewis (eds.) Post-war Britain, 1945–64: Themes and Perspectives (London: Pinter Publishers, 1989); Howard J. Dooley, “Great Britain's ‘Last Battle’ in the Middle East: Notes on Cabinet Planning during the Suez Crisis of 1956,” International History Review 11, no. 3 (August 1989). 25. Jonathan Kirshner, Appeasing Bankers: Financial Caution on the Road to War, (Princeton: Princeton University Press, 2007). 26. H. Clark Johnson, Gold, France and the Great Depression, 1919–1932, (New Haven: Yale University Press, 1997); Kenneth Moure, The Gold Standard Illusion: France, The Bank of France, and the International Gold Standard, 1914–1939, (Oxford: Oxford University Press, 2002); Martin Wolfe, The French Franc Between the Wars 1919–1939, (New York: Columbia University Press, 1951): pp. 35, 83. 27. Kenneth Moure, Managing the Franc Poincaré: Economic Understanding and Political Constraint in French Monetary Policy, 1928–1936, (Cambridge: Cambridge University Press, 1991): pp. 17–18; 22, 27, 121; Barry Posen, The Sources of Military Doctrine: France, Britain and Germany Between the World Wars, (Ithaca: Cornell University Press, 1984): p. 20; Robert Murray Haig, “The National Budgets of France, 1928–1937,” Proceedings of the Academy of Political Science 17, no. 4 (1938): pp. 26, 29; Talbot Imlay, Facing the Second World War: Strategy, Politics and Economics in Britain and France 1938–1940, (Oxford: Oxford University Press, 2003): p. 25; Bradford Lee, “Strategy, Arms, and the Collapse of France 1930–40”, in Richard Langhorne (ed.) Diplomacy and Intelligence during the Second World War, (Cambridge: Cambridge University Press, 1985): pp. 59, 63, 64, 65. 28. James Thomas Emmerson, The Rhineland Crisis, 7 March 1936: A Study in Multilateral Diplomacy, (Ames: Iowa State University Press, 1977), p. 78; Stephen Schuker, “France and the Remilitarization of the Rhineland, 1936,” French Historical Studies 14, no. 3 (Spring 1936), pp. 304, 330, 334, 335. 29. Daniel Drezner, “Bad Debts: Assessing China's Financial Influence in Great Power Politics,” International Security 34, no. 2 (2009). Additional informationNotes on contributorsJonathan KirshnerJonathan Kirshner is Stephen and Barbara Friedman Professor of International Political Economy at Cornell University, 2012–2013 World Politics Visiting Fellow at Princeton University, and author of American Power After the Financial Crisis (Ithaca: Cornell University Press, forthcoming)
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