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41. Money and Colonialism in Canada: An Interview with Brian Gettler

Author:
Brian Gettler and Martin Crevier
Publication Date:
06-2021
Content Type:
Commentary and Analysis
Institution:
The Toynbee Prize Foundation
Abstract:
On 30 April 2013, live from the International Space Station, the Canadian astronaut Chris Hadfield unveiled a new $5 banknote. It featured some of Canada’s contribution to space exploration. Here the country is imagined as a modern state, willing to contribute to multilateral scientific endeavours for the common good of humankind. Earth and the Great Lakes appear in the background, rendered from photographs supplied by the Department of Natural Resources. Having developed its own landmass, the image seems to imply, Canada now projects its knowhow to the confines of space. The twinned themes of internationalism and development are reinforced on the other side of the note. There features Wilfrid Laurier, a prime minister remembered for furthering an independent Canadian foreign policy within the British Empire and as an advocate of state-led Western settlement. If unlikely, Laurier and space exploration appear in the end an effective association for a banknote part of the “Frontier Series.” Money, we might glean from this anecdote, is far from a commonplace and benign object. It carries political significance and power even beyond the symbols emblazoned upon notes and coins. Yet money and currencies seldom emerge as a focal point in histories of colonialism and empire; normally they are an accessory to express value, a tool of exchange, or a medium of early encounters. In Colonialism’s Currency: Money, State, and First Nations in Canada, 1820–1950, Brian Gettler sets out to correct this narrative. He shows how money, in its materiality and from the practices surrounding it, can be conceived of as a political force that reshapes space, mediates the colonial project, extends sovereignty, and modulates behaviours. It is for him, more precisely, a technology that allows us to trace the emergence of the colonial state in what becomes Canada, as well as its complex and changing relationships with Indigenous peoples. Brian Gettler is an Assistant Professor at the University of Toronto. He has just published Colonialism’s Currency with McGill-Queen’s University Press. In our conversation, which has been edited for length and clarity, we discussed his new book, his historical interests, and how the history of currency in British North America can inform larger conversations about empire and colonialism.
Topic:
History, Colonialism, Empire, Money, Currency, Indigenous, and First Nations
Political Geography:
Canada and North America

42. China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System

Author:
Rajesh Bansal and Somya Singh
Publication Date:
08-2021
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
Central bank digital currencies (CBDC) are digital tokens issued by central banks. In a way, they are the digital version of cash; their value is guaranteed by a central bank. Unlike money held in credit cards and mobile wallets, CBDCs are not a mere representation of physical money stored elsewhere. Instead, they are a complete replacement for currency notes. While several countries are developing their digital currencies, China is well positioned to take the lead with the digital yuan. This paper highlights ways in which China can use its digital yuan to internationalize the renminbi (RMB) and gradually chip away at the hegemony of the dollar. The first part of the paper focuses on the dollar’s dominance in the global financial system and the privileges the United States accrues as a result of the dollar being the world reserve currency. The United States has a tight grip on the world’s payment rails, especially in the case of cross-border transactions. For example, the Society for Worldwide Interbank Financial Telecommunications (SWIFT)—the largest cross-border payment clearinghouse in the world—has to comply with and implement unilateral U.S. sanctions. These sanctions seriously hinder trade and damage the economies of the countries affected by them, as was the case with Iran, which lost $150 billion worth of revenue as a result of U.S. sanctions.1 Once a country is cut off from SWIFT’s network, it becomes extremely difficult for it to trade with the rest of the world. Thus, via the dollar’s dominance and its geopolitical muscle, the United States is positioned to maintain a tight grip on the world’s financial system. In an increasingly multipolar world, this outdated, decades-old system of the dollar as the apex currency and the United States’ position of power that allows it to pursue its own geopolitical interests has become outdated. The U.S. dollar’s hegemony has been challenged by economies like those of the European Union (EU), Russia, and China. Of all the countries, China finds itself in a dominant position to gain from this transition. In order to challenge the dollar’s hegemony and internationalize its currency, China will have to move away not just from the dollar but also from the payment rails dominated by the dollar. The best way to simultaneously do both would be to introduce a new payment rail like CBDCs. This paper analyses the way the launch of China’s CBDCs could greatly enhance its currency internationalization prospects. Considering China’s growing economy and influence over the world, the paper argues that China’s CBDC launch could bring a period of momentous change in the global financial system. In order to challenge the dollar, China will have to build the payments infrastructure required to facilitate the use of its digital yuan. It will also have to incentivize other countries to adopt its digital currency. China’s ability to successfully promote its currency using CBDCs will depend heavily on the country’s ability to relax capital controls and maintain the world’s trust in its institutions. China’s geopolitics will play a key role here. In the last decade, some of China’s major geopolitical efforts have set the stage for its CBDC launch. As China continues to use its foreign policy and technological capabilities to grow its influence in the global financial system, the launch of the digital yuan could be a significant step forward in this direction. This paper examines the reasons for China’s past efforts at currency dominance and explores ways in which the country can use its CBDC to further internationalize its digital yuan.
Topic:
Foreign Policy, Finance, Economy, Central Bank, and Currency
Political Geography:
China and Asia

43. Designing and Regulating Retail Digital Currencies

Author:
Steven L. Schwarcz
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Governments and multinational organizations are exploring the feasibility of developing “retail” digital currencies, sponsored by governmental central banks or privately issued, which consumers could use on a day-to-day basis as an alternative to cash. Central bank digital currencies could be either account-based or token-based. Privately issued digital currencies would likely be token-based. Private issuers are focusing on “stablecoins,” which are digital currencies backed by assets having intrinsic value. Retail digital currencies raise new regulatory issues in addition to those typically associated with money and payment systems. The most successful retail digital currencies are likely to be used not only domestically but also in cross-border transactions, which can be costly. They therefore should be designed, regulated and supervised to reduce these costs and, ideally, also to increase consumer accessibility — and thus to broaden financial inclusion.
Topic:
International Cooperation, Currency, Innovation, Cryptocurrencies, and Digital Currency
Political Geography:
Global Focus

44. The Dynamics of the Succession of Currencies in the 21st Century - A Case of Chinese Financial Leadership?

Author:
Gustavo de Moraes and Leonardo Giacomin
Publication Date:
07-2021
Content Type:
Journal Article
Journal:
AUSTRAL: Brazilian Journal of Strategy International Relations
Institution:
Postgraduate Program in International Strategic Studies, Universidade Federal do Rio Grande do Sul
Abstract:
The global monetary system since the Industrial Revolution in two periods had two periods. First, a period with Britain as the great economic and political power and the Pound Sterling as the most important international currency and second, the United States as the leading economy and a dollar-based international scenario. The relation between goods, money, and foreign exchange markets is important to understand patterns in terms of exchange rate and currency internationalization. Therefore, the Crowther balance of payments cycles may be important to identify these patterns and to serve as a standard of reference to investigate shifts in exchange rate, and their consequences on balance of payments movements. Since 1978, China has emerged as a strong candidate to assume protagonist in the global monetary system, displaying high and stable economic growth. This paper aims to investigate the necessary conditions for China to internationalize the Renminbi, local currency, and to infer its status in that progress.
Topic:
Finance, Leadership, Exchange Rate Policy, and Currency
Political Geography:
China, Asia, and Global Focus

45. Dollar not so dominant: Dollar invoicing has only a small effect on trade prices

Author:
Joseph E. Gagnon and Madi Sarsenbayev
Publication Date:
12-2021
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
This paper estimates and tests four models of the effects of exchange rate changes on export prices. It supports the Goldberg and Knetter (1997) canonical result that exporters adjust their prices by about half of any movement in exchange rates. A new twist is that exchange rate movements against importing countries account for only three-fifths of this price adjustment, while exchange rate movements against a dominant currency account for the other two-fifths. The dominant currency is the euro in Europe and Africa and the US dollar in Asia and the Western Hemisphere. The recent claim that the dollar is the most important driver of export prices (Gopinath et al. 2020) is shown to be valid only for the smallest exporting economies. For the bulk of international trade, the extra effects of the dollar (or the euro) beyond their effects as exporter or importer currencies are relatively modest.
Topic:
Foreign Exchange, Exports, Currency, Trade, and Dollar
Political Geography:
Global Focus

46. The Covid‐​19 Coin Shortage: Causes, Responses, and Lessons

Author:
Nicholas Anthony
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
Covid‐​19 altered almost every facet of the human experience in 2020. For those who were lucky, living rooms became offices, cocktail hours went virtual, and spare time was spent exploring new passions. But others suffered: hundreds of thousands of people died, millions became unemployed, and even more were left uncertain about their future. All the while, smaller inconveniences multiplied. Of these, the most unexpected was a serious coin shortage in the summer of 2020.
Topic:
Currency, COVID-19, Cash, and Shortage
Political Geography:
Global Focus

47. Covid Cash

Author:
Kenneth Rogoff and Jessica Scazzero
Publication Date:
10-2021
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
The advent of the Covid‐​19 pandemic has witnessed a strong uptick in paper currency demand across advanced economies, even as contactless methods surged ahead of cash in payments. This article explores these two contrasting phenomena, which are in fact continuations of much longer‐​term trends. The use of cash, while still important for small in‐​person transactions, has been declining as a share of overall consumer payments for decades, thanks to a steady stream of innovations including credit cards, debit cards, electronic transfers, and smartphone payment apps. For example, in the United States, paper currency accounted for 26 percent of the number of consumer payments in 2019 but only 6 percent in value terms, down from 40 percent and 14 percent, respectively, in 2012. Meanwhile, U.S. dollars in circulation have increased from $1.1 trillion in January 2012 to $1.8 trillion in January 2020, exploding to $2.1 trillion in December 2020. The same pattern remains if one excludes foreign holdings (50–60 percent of the total) and is found in most other advanced economies as well. Some argue that soaring currency demand contests the view that the world is headed to a cashless future, or even a “less‐​cash” society (see Bech et al. 2018; BIS 2020).
Topic:
Currency, COVID-19, Digitization, and Cash
Political Geography:
Global Focus

48. CBDCs for Dummies: Everything You Need to Know about Central Bank Digital Currency (And Why You Shouldn’t Be Afraid of It)

Author:
Nicola Bilotta
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
“No cash accepted in this store”. What might seem to some like science fiction is on its way to becoming reality. The rise of non-cash payments is a global phenomenon, although moving at different speeds around the world. To keep up with the digitalisation of payments (and of the economy), many central banks are exploring the development of Central Bank Digital Currencies (CBDCs), a digital form of cash. Despite being confined to a technical discussion among experts, when (rather than if) launched, CBDCs concerns us all. Thus, raising awareness of what CBDCs are, and of their key economic and political dimensions, is crucial to ensure that citizens are not only passive spectators. This paper has the ambition to provide (non-expert) readers with straightforward and simple answers to some of the many questions they may have around CBDCs. It sets the ground to better understand what CBDCs are (and are not), their drivers and their possible design. It will explore the impact of CBDC systems on privacy, the geo-strategic drivers of CBDCs and the possible rivalry between public and private money. Paper prepared in the framework of a research effort on the risks and the opportunities related to Central Bank Digital Currencies (CBDCs) with the support of Intesa Sanpaolo and the Bank of Italy.
Topic:
Political Economy, Governance, European Union, Finance, Currency, and Digital Policy
Political Geography:
China, Europe, and United States of America

49. An International Digital Yuan: (Vane) Ambitions, (Excessive) Alarmism and (Pragmatic) Expectations

Author:
Nicola Bilotta
Publication Date:
07-2021
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
Days after the European Central Bank (ECB) publicly disclosed its roadmap for a digital euro project on 24 July, the People’s Bank of China (PBoC) published a white paper describing the advancements of its plan for a digital yuan (e-CNY). While the EU roadmap outlines an investigation phase which will end in five years, China has already introduced several pilot experiments for its e-CNY. In June 2021, the e-CNY was employed in more than 70.7 million transactions for a value of 34.5 billion yuan by 20.8 million retail users and 3.5 million corporate users.
Topic:
International Political Economy, Political Economy, Governance, Finance, Currency, and Digital Policy
Political Geography:
China and Asia

50. If you Can't Beat Them, Join Them: Should States Embrace Bitcoin?

Author:
Jesse Colzani
Publication Date:
09-2021
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
Bitcoin – the most secure and well-established technology to store value[1] – was created in 2008 to challenge the state’s centralised monopoly on money. It is a digital currency worth 1 trillion US dollars that knows no boundaries and is not controlled by any central authority. Although it is considered a threat to the established order, countries and institutional actors are gradually realising Bitcoin can also be a tool to advance their economic and geopolitical interests. Today, governments find themselves in the difficult position of having to decide whether Bitcoin should be integrated into their economies and governance structures or if they should continue to oppose, block or seek to co-opt the digital currency. But to understand Bitcoin and make an informed decision, one has to first appreciate the different components of its ecosystem.
Topic:
Political Economy, Governance, Currency, Digital Policy, and Bitcoin
Political Geography:
Global Focus