Reframing the euro vs. dollar debate through the perceptions of financial elites in key dollar-holding countries

Otero‐Iglesias, Miguel; Steinberg, Federico

doi:10.1080/09692290.2012.658736

Cited by 22 publications

(6 citation statements)

References 30 publications

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“…A debt crisis in its periphery and structural flaws in the monetary union have compromised the safe status of Eurozone government debt (Germain and Schwartz, 2014; Otero-Iglesias and Steinberg, 2013). The depth and liquidity of the UK government bond market pales in comparison to that of the US.…”

Section: Foundations Of Financial Powermentioning

confidence: 99%

A global bond: Explaining the safe-haven status of US Treasury securities

Hager

2016

European Journal of International Relations

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This article offers new theoretical and empirical insights to explain the resilience of U.S. Treasury securities as the world's premier safe or "risk free" asset. The standard explanation of resilience emphasizes the relative safety of U.S. Treasuries due to a shortage of safe assets in the global political economy. The analysis here goes beyond the standard explanation to highlight the importance of domestic politics in reinforcing the safe status of U.S. Treasury securities. In particular, the research shows how a formidable "bond" of interests unites domestic and foreign owners of the public debt and works to sustain U.S. power in global finance. Foreigners who now own roughly half of the U.S. public debt have something to gain from their domestic counterparts. The top one percent of U.S. households that dominate domestic ownership of U.S. Treasuries has considerable political clout, thus alleviating foreign concerns about the creditworthiness of the U.S. federal government. Domestic owners, in turn, benefit from the seemingly insatiable foreign appetite for U.S. Treasury securities. In supplying the U.S. federal government and U.S. households with cheap credit, foreign investors in U.S. Treasuries help to deflect challenges to the top one percent within the wealth and income hierarchy.

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Section: Foundations Of Financial Powermentioning

confidence: 99%

A global bond: Explaining the safe-haven status of US Treasury securities

Hager

2016

European Journal of International Relations

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“…Moreover, the currency issuer needs to refrain from pursuing inflationary fiscal policies and be committed to balanced budgets and low public debt levels: ‘very large fiscal deficits in the center country, by raising real interest rates in the entire system, erode the legitimacy of the monetary leader vis-à-vis other countries’ (Walter, 2006: 66). A number of prominent scholars of international currencies have argued that the US exploited the ‘exorbitant privilege’ associated with issuing the world’s key currency by pursuing irresponsible macroeconomic policies, which led to ‘very large and sustained US federal budget deficits’ that ‘warn of the threat of future inflation’ (Kirshner, 2008: 419; see also Calleo, 2009; Eichengreen, 2011; Layne, 2012; Otero-Iglesias and Steinberg, 2013). 4 In terms of monetary policy, a common interpretation is that ‘the Fed’s quantitative easing (QE) policies have undermined its reputation as a hawkish central bank’ (Otero-Iglesias and Zhang, 2013).…”

Section: Macroeconomic Policy International Currencies and Safe Assetsmentioning

confidence: 99%

Meeting the world’s demand for safe assets? Macroeconomic policy and the international status of the euro after the crisis

Vermeiren

2017

European Journal of International Relations

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In this article, I engage with the chartalist literature to explore the political foundations of international currencies. Drawing on this literature as well as on recent scholarship on the shortage of safe assets in the world economy, I challenge a prevailing premise of the International Political Economy literature that international currency status needs to be based on conservative macroeconomic policy institutions and practices, which is deemed necessary to maintain foreign confidence in the stability of the real value of the international currency. I contend that international currency status in the post-crisis world economy hinges on the willingness and capacity of the currency provider to adopt accommodating monetary and fiscal policies. First, the central bank needs to offer a backstop to the market for sovereign debt securities by acting as a lender of last resort to the government, whereas fiscal policy expansion is necessary to sufficiently expand the stock of the only securities that can assume the function of genuinely safe assets: sovereign debt. Second, expansionary monetary and fiscal policies enable the international currency issuer to supply safe assets to the rest of the world by running deficits on its trade balance. This article analyses how the European Central Bank's monetary policy decisions in the wake of the crisis ran against these two prerequisites, constraining the Eurozone to become a large net provider of safe assets in the world economy. By linking these decisions to the creditor and export interests of the Northern Eurozone countries, it disputes the European Central Bank's 'neutral stance' regarding the internationalization of the euro.

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“…Although the bulk of these reserves have been invested in US dollar-denominated securities, the euro has always been a favorite outlet for these countries to diversify their foreign exchange reserves away from the US dollar. Their diversifi cation urge is related to their growing dissatisfaction with the US dollar, which has experienced structural exchange rate depreciation over the past decade as a result of persistent defi cits in the US current account balance (Vermeiren 2010 ;Otero-Iglesias and Steinberg 2013 ). Due to the US dollar's depreciation and the foreign exchange interventions by the BICs, the euro has experienced recurrent rounds of appreciation/overvaluation since its physical introduction in 2002.…”

Section: Varieties Of Capitalism and The Ea's Extra-regional Trade Immentioning

confidence: 99%

Rising Powers and Economic Crisis in the Euro Area

Ville

Vermeiren

2016

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Aims of the SeriesHow is the global order changing, and why? The contemporary dynamics of the global political economy and global security in the twenty-fi rst century are experiencing a series of fundamental transitions, which are challenging and transforming the existing global order. These dynamics are reshaping relations between and within different categories of actors such as states, club forums, international organizations, transnational policy communities, private sector agencies and corporations, and civil society organizations. At the same time, processes of global reordering have led to the emergence of new issue areas and policy problems that the existing landscape of national, regional, and global governance is struggling to effectively address. The Centre for the Study of Globalisation and Regionalisation (CSGR) at the University of Warwick has been home, since 2011, to a major EU funded research project on Global Reordering. With 16 partners from across the world, the project has focussed on how European interests, objectives, and modes of governance might infl uence the way in which a post-unipolar global order takes shape. Global Reordering seeks to build on this research agenda, and also expand it by moving beyond just a European focus towards a truly global perspective. Global Reordering invites manuscript submissions based on innovative empirical research that is theoretically-informed and is relevant for contemporary policy debates. The series welcomes proposals for authored monographs, edited volumes and short length Pivots. Key areas include: changing modes of global governance and multipolarity; global public policy networks; emerging powers and multipolar alternatives; regions and regionalism; as well as regional and global leadership.More information about this series at

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Reframing the euro vs. dollar debate through the perceptions of financial elites in key dollar-holding countries

Cited by 22 publications

References 30 publications

A global bond: Explaining the safe-haven status of US Treasury securities

A global bond: Explaining the safe-haven status of US Treasury securities

Meeting the world’s demand for safe assets? Macroeconomic policy and the international status of the euro after the crisis

Rising Powers and Economic Crisis in the Euro Area

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