11. Europe under US Monetary Hegemony: How the COVID-19 Pandemic Will Undermine a 100-Year-Old Relationship
- Author:
- Brendan Brown
- Publication Date:
- 10-2020
- Content Type:
- Policy Brief
- Institution:
- Hudson Institute
- Abstract:
- This policy study is based on the newly released book, Europe’s Century of Crises under Dollar Hegemony: A Dialogue on the Global Tyranny of Unsound Money, by Brendan Brown and Philippe Simonnot, published by Palgrave Macmillan. One hundred years ago, the United States emerged from the First World War and its immediate aftermath, including the Spanish flu pandemic, as the global monetary hegemon, exercising immense power over the Old Continent. This new power quickly became the source of huge instability in Europe, culminating in the collapse of the Weimar Republic. After World War II, the Bretton Woods system set new contours for US monetary hegemony, ultimately resulting in the great economic crisis of 1973–75. This woeful history continues to the present day: Dollar hegemony has not been a force for good. It could have been different. The United States and Europe would both have gained from a US hegemony based on sound money principle. Instead, the guiding characteristic of US monetary power has been inflation, especially around election time. According to the doctrine made notorious by Treasury Secretary John Connally, who served under President Nixon, “the dollar is our currency but your problem.” The US monetary regime’s further lurch toward fundamental unsoundness during the COVID-19 pandemic is not getting the new century of US monetary hegemony off to a new start. The “known unknown” is whether forces will emerge in Europe that will again challenge US inflationary dominance, as occurred under Germany’s leadership in the 1970s. Could high inflation in the post-pandemic US economy cause US monetary hegemony over Europe to crumble?
- Topic:
- Economics, International Trade and Finance, History, Monetary Policy, Hegemony, Transatlantic Relations, and COVID-19
- Political Geography:
- Europe and United States of America