Notes on understanding monetary power as an instrument of u.s. foreign policy
DOI:
https://doi.org/10.38180/hrnca035Keywords:
Dollar, Foreign Policy, Monetary Hegemony, Sanctions, DedollarizationAbstract
This article examines how the international centrality of the dollar is translated into foreign-policy capacity for the United States. Rather than treating the dollar as either a spontaneous market outcome or the product of a single geopolitical decision, the article offers a mechanism-based explanation grounded in a historical-institutional design. It combines world-systems analysis as a background framework of hierarchy with approaches focused on structural power, dominant-currency dynamics, safe assets, and financial coercion. The argument is that dollar primacy rests on five mutually reinforcing pillars: the institutional order built in 1944; network effects in payments, invoicing, and financing; global demand for dollar safe assets; the Federal Reserve’s capacity to supply international liquidity; and the legal-sanctions infrastructure that enables monitoring and exclusion. Recent evidence confirms the persistence of the dollar, although it also points to a partial and sectoral process of dedollarization. The article concludes that the dollar remains the main monetary instrument of U.S. foreign policy, but that its power is conditional on U.S. macrofinancial credibility, allied cooperation, and the absence of a substitute able to match the dollar across all of its international functions.
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