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Sustainable SecurityRethinking American National Security Strategy$
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Jeremi Suri and Benjamin Valentino

Print publication date: 2016

Print ISBN-13: 9780190611477

Published to Oxford Scholarship Online: December 2016

DOI: 10.1093/acprof:oso/9780190611477.001.0001

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Dollar Diminution and New Macroeconomic Constraints on American Power

Dollar Diminution and New Macroeconomic Constraints on American Power

Chapter:
(p.21) 1 Dollar Diminution and New Macroeconomic Constraints on American Power
Source:
Sustainable Security
Author(s):

Jonathan Kirshner

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190611477.003.0002

This chapter briefly explains how the global financial crisis of 2007–2008 and its aftermath revealed underappreciated vulnerabilities in the US economy. These led to disenchantment with the American financial model and its global economic leadership. One consequence of this will be to put pressure on the dollar's global role. The chapter discusses two distinct effects felt by states managing international currencies in relative decline: (1) the loss of the benefits associated with issuing international money, and (2) the challenges of issuing a currency experiencing a contraction in global use. The principal consequences of international currency diminution (in general and for US power) include pressure on defense spending, reduced macroeconomic autonomy (and thus the ability to finance ambitious foreign policies), vulnerability to currency manipulation, and greater exposure to debilitating financial distress, especially during international political crises.

Keywords:   Global financial crisis, American financial model, international currency diminution, defense spending, currency manipulation, the dollar

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