Economist, independent consultant and specialist in sovereign risk and country risk, he studied at Sciences Po Paris and Princeton University. He taught at the Graduate Institute, at the University of Geneva and worked for various international institutions and financial establishments. His latest publication is The Future of Multilateralism and Globalization in the Age of the US–China Rivalry (Routledge, October 2023).
How was the dollarization of international trade implemented?
From the interwar period onwards, we clearly witnessed a rise in the power of the dollar, due to the status of the United States as the leading international creditor, and because the financial center of New York partly replaced London and almost completely Paris. After the Second World War, dollarization became the rule with the Bretton Woods system which was put in place in 1944. This is the famous formula, “dollar as good as gold”). The international monetary system is backed by gold, the dollar is the reference currency because the major industrialized countries, apart from the United States, and the developing countries must obtain dollars to have gold.
This article is taken from “Special Edition Le Monde – 40 maps to understand a fractured world”2023. This special issue is on sale at newsstands or online by going to our store website.
At the origin of dollarization (that is to say the use of the dollar by non-Americans) is a system which will ultimately be relatively little contested because the United States is the leading economic, commercial and financial. The World Bank and the International Monetary Fund, born from the Bretton Woods agreements, mainly use the dollar. In 1971, it was a shock: the President of the United States, Richard Nixon, announced the end of the convertibility of the dollar into gold. From there, doubt arises about the ability of the United States to preserve its monetary leadership.
In 1973, the dollar suffered a devaluation. The idea takes hold while “the dollar is over”. But what to replace it with? The ruble, no, the franc, no, the pound is in bad shape, there remains the Deutsche Mark and the yen. And possibly the Swiss franc. But these savings are too small.
The years pass, and everyone finally realizes that we are in a new monetary system where everything has changed but nothing has changed. Of course, the exchange rates are floating, but the dollar is still considered essential, we will always borrow from New York, trade in dollars continues… A currency which is not that strong, but that suits everything well the world.
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