The Power and International Politics of Money
- W. Travis SelmierW. Travis SelmierFinance Department, Indiana University
War, trade, and money synergistically developed over three millennia, each proving important to the emergence of nation-states. By the 19th century, fiduciary money—forms of money based on trust, such as paper money—catalyzed the development of national monetary and banking systems. As nexus of international finance and metropole of the world’s largest empire, the United Kingdom garnered political and economic power. But over the course of two world wars, power shifted to the United States. Small successes and great failures of the interwar period influenced creation of Bretton Woods institutions, completing a transformation from an international monetary system into an international financial system [IFS], which included not only monetary flows but also a formal, institutionalized system of governance. The dollar’s flows became the IFS’ lifeblood, engendering structural power for the United States, which has been held in place through reserve currency status, institutional stickiness through banking and currency trading, and ideational influence. Introduction of the Euro and attempts in Asia to dismantle the “Asian Bloc” have shaken, but not removed, American structural power. Money’s foundations have always rested on trust, trading, and risk taking; emergence of extensive credit and virtual money, and related security concerns, bring forth new topics resting on these old foundations.