Little has contributed more to the emergence of today’s world of financial globalization than the design of the international monetary system. In its current setup, it has a hierarchical structure with the US-Dollar at the top and various other monetary jurisdictions forming a multilayered periphery to it. A key feature of the system is the creation of US-Dollars offshore—a feature that in the 1950s and 60s has developed in co-evolution with the Bretton Woods System and in the 1970s replaced it. Since the 2007-9 Financial Crisis, this ‘offshore US-Dollar system’ has been backstopped by the Federal Reserve’s network of swap lines to non-US central banks. This systemic evolution may continue in the decades to come, but other systemic arrangements are possible as well and have historical precedents. This article discusses four evolutionary trajectories that would lead to different setups of the international monetary system by 2040, taking into account how it’s hierarchical structure and the role of offshore credit money creation may evolve. Next to a continuation of US Dollar hegemony, we present the emergence of competing monetary blocs, the formation of an international monetary federation, or the drifting into an international monetary anarchy.
Presentations at 15. Jahrestagung der Keynes-Gesellschaft, Berlin (02/2019) and World Interdisciplinary Network for Institutionalist Research (WINIR), Lund (09/2019)
Journal of Institutional Economics