Reluctant Monetary Leaders? The New Politics of International Currencies

Abstract

The severity of the US financial crisis of 2007–2008 has generated new interest in the future of the US dollar as the world’s KC. Many commentators have predicted that the greenback’s dominant global position will be undermined by the economic difficulties of the United States. These predictions have been reinforced by developments in the political realm, where the crisis experience has prompted foreign policy makers to openly question whether the world is well served by the current dollar-centred international monetary system. Policy makers in some countries, notably the PRC, have matched their words with actions designed to begin promoting the internationalization of their country’s currency (the renminbi [RMB] in the case of the PRC). Is the dollar’s international dominance thus doomed to fade away, just as sterling’s did over the course of the twentieth century?