The earliest stage in the life cycle of an international currency is youth – the vital formative years when a national money first starts to show signs of acceptance for international purposes. The issuing authorities, in response, have a choice among three strategic options: prevention, promotion, or permission. The issuer may seek to promote foreign acceptance; conversely, it may wish to take action to prevent wider use; or, less decisively, it may elect simply to permit internationalization. Recent history provides examples of all three choices, with outcomes that have varied considerably. The prevention option is illustrated by the early West German and Japanese efforts to resist internationalization of their currencies, respectively, the Deutsche mark and yen. Examples of a promotion strategy include both a short-lived experiment by Japan in the 1990s and China’s more recent campaign for its renminbi, which is still ongoing. The permission option is represented by Europe’s “non-policy” response to the rise of the euro after the currency’s birth in 1999. Taken together, these episodes form a remarkably consistent pattern. They all illustrate the importance of geopolitical ambition – its presence or absence – as a motivating force for currency statecraft.
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