International Money in Motion

The opening chapter presents the key features of the international monetary system, an aspect of the world economy much ignored by the public nor treated with sufficient concern by the economics profession. Looking at the respective market shares of currencies per world-money function, we can identify a hierarchical “monetary pyramid” dominated by the US dollar on top, followed by the euro, the rapidly internationalizing yuan, and two other layers of currencies with more limited international or regional status. The dominant position of the US dollar has distinct implications both for the United States and the rest of the world. But those tend to be contradictory, as a tension between America’s pursuit of domestic policy priorities and its responsibilities toward the rest of the world. That tension is now playing itself out with the dollar standard giving way to a multi-currency standard centered on USD, EUR, and CNY.