Dollar hegemony

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For the topic of Jean Gabriel's book The Dollar Hegemony: Dollar, Dollarization, and Progress (2000), see dollarization.

Dollar hegemony is the hypothesized monetary hegemony of the US dollar in the international finance global economy. Henry C.K. Liu popularized the term in the article "Dollar Hegemony has to go" in Asia Times, April 11, 2002. The article was quoted by William Clark,[1] Immanuel Wallerstein of the Fernand Braudel Center,[2] Greg Moses,[3] and James Robertson.[4] David Fields & Matias Vernengo (2013) argue that the existing dominant view on the international position of the dollar is been based on what is called a Metallist understanding of money. From the alternative Cartalist view of money, the monetary hegemon is not required to maintain credible macroeconomic policies (i.e., fiscally contractionary policies so that the value of the currency is maintained), but to provide an asset free of the risk of default.


The term describes a geopolitical phenomenon of the 20th century in which the U.S. dollar, a fiat currency, became the primary reserve currency internationally. Three developments allowed dollar hegemony to emerge over a span of two decades.

  • The Bretton Woods system established in 1945 a fixed exchange rate regime based on a gold-backed dollar. The US did not view cross-border flow of funds necessary or desirable for promoting trade or economic development. In response to the accrual of negative consequences from the Triffin dilemma, President Richard Nixon abandoned the Bretton Woods regime in 1971 and suspended the dollar's peg to gold as U.S. fiscal deficits from overseas spending caused a massive drain in U.S. gold holdings.
  • The second development was the denomination of oil in dollars after the 1973 Middle East oil crisis; see petrodollars.
  • The third development was the emergence of deregulated global financial markets after the Cold War that made cross-border flow of funds routine.

See also[edit]



  • Fields, David, & Matias Vernengo 2013. “Hegemonic Currencies during the Crisis: The Dollar versus the Euro in a Cartalist Perspective,” Review of International Political Economy, 20(4): 740-759
  • Fields, David (Forthcoming), "Dollar Hegemony", Edward Elgar Encyclopedia on Central Banking, edited by L.-P Rochon & Sergio Rossi, Edward Elgar: Northampton, MA. In press, 01/2015.

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