Financial Cold War - James A. Fok

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risks. The global payments and settlement infrastructures created in the 1960s and 1970s enabled and accelerated this process, as they facilitated secure and cost-efficient cross-border financial trading and, more importantly over time, the mobilisation of vast pools of securities as collateral around the globe.

      Given how entrenched it has become, it is difficult to see how the dollar could be displaced. However, the dollar's success has generated significant challenges for other countries and has created enormous burdens for the US itself. International holdings of US financial assets, particularly Treasury securities held by foreign governments, have saddled the US with weighty international obligations. The reduced currency flexibility that the US is locked into by Triffin's dilemma has also contributed to wage stagnation and unemployment domestically. Notwithstanding the exorbitant privilege that the dollar has conferred upon the US, therefore, it might be asked whether it is the rest of the world or America that has borne the higher cost.

      1 1. (Barton, 2021) and IMF data, which can be accessed at: https://data.imf.org.

      2 2. (WTO, 2019).

      3 3. World Bank data. Figure is for 2019 and can be accessed at: https://data.worldbank.org.

      4 4. (Paulson Jr., 2020).

      5 5. (Sharma, 2019). Emphasis added.

      6 6. (Tooze, 2014, p. 33).

      7 7. (Ahamed, 2009, p. 135).

      8 8. (Steil, 2013, p. 34).

      9 9. (Steil, 2013, p. 55).

      10 10. (Steil, 2013, p. 28).

      11 11. (Steil, 2013, pp. 55–56). Quote attributed to Henry Morgenthau III.

      12 12. (Steil, 2018, p. 89).

      13 13. (Steil, 2013, p. 72).

      14 14. (Ahamed, 2009, p. 131).

      15 15. In 1933, Cornell professor of farm management George Warren, along with two colleagues, published a title Wholesale Prices for 213 Years: 1720–1923, in which they documented a strong correlation between trends in commodity prices and the global supply and demand for gold. One of their conclusions was that, if commodity prices fell because of a gold shortage, raising the price of gold (in other words, devaluing the currency against gold) would be a means of reversing falling prices. This argument was to become influential on the Roosevelt Administration as it battled deflation brought on by the Great Depression in the 1930s.

      16 16. (Ahamed, 2009, pp. 159–161).

      17 17. (Ahamed, 2009, p. 100).

      18 18. (Ahamed, 2009, pp. 218–219).

      19 19. (Steil, 2013, p. 74).

      20 20. (Ahamed, 2009, pp. 241–268).

      21 21. (Carter, 2020, p. 130)

      22 22. Fractional reserve banking is a system in which only a fraction of bank deposits is backed by actual cash on hand and available for withdrawal. This system frees up more capital for lending, allowing the economy to expand more quickly.

      23 23. (Wheelock, 1995).

      24 24. (Steil, 2013, p. 157).

      25 25. (Ahamed, 2009, p. 491).

      26 26. (Steil, 2013, p. 207).

      27 27. Under both the Atlantic Charter and Article VII of Lend-Lease, the US had sought to put an end to Britain's Imperial Preference system that provided preferential trade terms within the British Commonwealth.

      28 28. (Steil, 2013, p. 129).

      29 29. (Steil, 2013, p. 219).

      30 30. (Steil, 2013, pp. 472–487).

      31 31. Notwithstanding the prefix ‘Euro-’, the term ‘Eurodollar’ refers to all US dollar deposits held at banks outside the US and are therefore not under the jurisdiction of the Federal Reserve. Thus, a US dollar-denominated deposit at a bank in Hong Kong or Tokyo would be likewise deemed a Eurodollar deposit.

      32 32. (O'Malley, 2015, p. 13).

      33 33. (O'Malley, 2015, p. 13).

      34 34. (Schenk, 1998, p. 222).

      35 35. The spot market is where financial instruments are traded for immediate delivery.

      36 36. Threadneedle Street in the City of London is the location of the Bank of England and is commonly used to refer to the UK's central bank.

      37 37. (Schenk, 1998, pp. 224-227).

      38 38. (O'Malley, 2015, p. 13).

      39 39. (O'Malley, 2015, p. 14).

      40 40. (O'Malley, 2015, p. 17).

      41 41. (O'Malley, 2015, p. 17). Quote attributed to John Craven.

      42 42. (O'Malley, 2015, p. 18). Quote from a speech by Lord Cromer, Governor of the Bank of England,

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