The Geopolitics of Currencies and the Future of the International System

Geopolitics, the dictionary tells us, is about international great-power rivalries –the struggle for dominance among territorially defined states. Conflict is at the heart of geopolitics. Geopolitical relations are dynamic, strategic, and hierarchical. In geopolitics, the meek definitely do not inherit the earth. Today, much the same can be said about currencies, which in recent years have become increasingly competitive on a global scale. Monetary relations, too, have become conflictual and hierarchical; and the meek are similarly disadvantaged. At issue is a breakdown of the neat territorial monopolies that national governments have historically claimed in the management of money, a market-driven process that elsewhere I have described as the deterritorialization of money. What are the geopolitical implications of this new geography of money? At present, one currency stands head and shoulders above the rest –the US dollar, familiarly known as the greenback. The dollar is the only truly global currency, used for all the familiar purposes of money –medium of exchange, unit of account, store of value– in virtually every corner of the world. From its dominant market share, the United States gains significant economic and political advantages. The question is: can the dominance of the dollar be challenged? The answer comes in two parts: first, if we look at the logic of market competition; and, secondly, if we factor in government preferences as well