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(p.95) Five Maturity
Currency Statecraft
Benjamin J. Cohen
University of Chicago Press

At the stage of maturity in the life cycle of an international currency, the challenge is: What should the issuing government do with its currency power? The options are exploitation, evasion, or enjoyment. Should the issuer seek to capitalize on the advantages offered by the newfound power resource? Should it look for some way to escape potential risks of currency internationalization? Or should it, in a passive mode, simply accept the benefits of internationalization as they come? Once again, a brief review of recent history illustrates the importance of geopolitical ambition – its presence or absence – in determining which option will be chosen. Most countries that have seen their money rise to the upper ranks of the global monetary hierarchy, just below America’s top-ranked dollar, have settled for the enjoyment option, eschewing the attractions of currency power. These include today’s euro and yen, Britain’s pound, the Swiss franc, and the Canadian and Australian dollars. For the United States by contrast, deeply enmeshed in geopolitics, passive currency statecraft is not a natural option. The chapter explains and evaluates the many ways that the United States has exploited its currency power, both directly and indirectly.

Keywords:   international currency, currency power, currency statecraft, geopolitical ambition, monetary hierarchy, euro, yen, British pound, dollar

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