Financial Warfare: Money as an Instrument of Conflict and Tension in the International Arena

This project employs a historical, institutionalist, and legal approach to analyzing financial warfare, specifically utilizing a chartal-spatialist theory of money. Utilizing these theories in conjunction with historical case studies, a theory of financial warfare is developed through understanding money as a product of social stratification and hierarchy, and therefore that the creation of money itself is a process of power. The spatiality of a powerful money expands beyond its national borders, and hence there is a hierarchy within money itself in the international arena. To build the theory, this project includes three case studies of implementations of financial warfare, each of which add a piece to the overall story: counterfeiting, financial sanctions policy, and counterterrorism through the dismantling of terrorist organizations’ financial networks. As such, through focusing on money as an instrument of conflict and tension, the theory of financial warfare developed in this project focuses on the strength of a country’s currency, as well as its position in the international financial system. Given the fact that hegemony is relative, the theory outlines preconditions for successfully implementing financial warfare, which include having higher financial power relative to the target country, having macroeconomic flexibility through issuing a strong sovereign currency, and having an elastic access to the law as defined in Katherina Pistor’s legal theory of finance. This project further concludes that given its position as the issuer of the global reserve currency and the central authority in the international financial system, the United States is in the highest position of power to implement financial warfare