In Greek mythology, Charon’s obol was a coin placed in the mouth of the dead to bribe the ferryman, Charon, to give a soul safe passage across the River Styx. The obol was a silver coin worth one sixth of a drachma.

On Wednesday, Bloomberg reported that Iran is accepting tolls in Chinese renminbi — or stablecoins — to assure the safe passage of ships through the Strait of Hormuz:

For oil tankers, the starting price in the negotiations is typically around $1 per barrel of oil, paid in yuan, or stablecoins — cryptocurrencies pegged to the value of hard currency.

To paraphrase their reporting, Iran’s National Security Committee approved a bill to impose fees on ships passing through the Strait. Operators must contact an intermediary linked to Iran’s Revolutionary Guard Corps (IRGC) with detailed vessel information that is then screened for ties to Israel, the United States, or other states Iran considers hostile. Fee negotiations rely on a ranking from 1–5, with friendly countries getting better terms. This builds upon CNN’s reporting that Iran was considering only allowing tankers transporting oil traded in RMB to pass through the Strait.

Let me point out irony number one: per Bloomberg’s reporting, the fee is still assessed in dollars. I don’t think ships are paying 1 RMB per barrel of oil. Coverage is limited but it sounds like the dollar is still the unit of account. So, ships can’t pay in USD but the transaction will still be denominated in USD? Alright.

Anyway, given that a Very Large Crude Carrier holds roughly 2 million barrels, a single tanker could face fees starting at $2 million per transit. If these tolls (bribes) are being paid in RMB, that’s a lot of RMB. In an analysis of China’s cross-border RMB payment system, CIPS, Alisha Chhangani at the Atlantic Council writes:

GeoEconomics Center analysis of CIPS data shows in the chart below that monthly averages for daily transaction volume remained within a $85–105 billion (600–750 billion yuan) range over the past year. In mid-to-late March, however, daily observations rose to over $130 billion (around 940 billion yuan). On April 1, CIPS reported that the daily average transaction volume in March reached $134 billion, or 920.45 billion yuan.

That is a nearly 60% increase of cross-border RMB volume from the lower bound. Chhangani also notes that not all of this volume is from the (relatively new) tolling system, but the timing is interesting in the context of the war.

Stable passage

So, what about tolls slash bribes paid in stablecoins (98% of which are pegged to the U.S. dollar)? If the toll slash bribe system proves durable, my guess is that China and its closest trading partners will opt to pay in RMB. Countries without significant RMB payment infrastructure (i.e. anyone who is not a direct or indirect participant in CIPS) will probably pay in stablecoins.

So we should be watching for a few signals in stablecoin settlement volume:

• Aggregate stablecoin volume: According to Artemis, a blockchain analytics firm, stablecoin volume on March 30th hit $321 billion. This is well within the 30-day range, suggesting that the volume has not substantially picked up yet.

• Specific on-chain data: Increases in on-chain transactions in stablecoins on specific networks favored by Iran (like USDT on Tron) could suggest more durable usage. An academic paper from 2025 stated USDT on Tron accounted for approximately 72% of Iranian stablecoin activity.

• Large one-off transactions: The sudden appearance of individual large stablecoin transfers (over $1 million) that can be directly correlated to real-time transit of a vessel.

Irony number two is not just that the U.S. dollar are the unit of account in assessing the toll slash bribe, but also that it is a method of payment, via stablecoins — despite Iran previously vowing to fire upon ships carrying oil traded in dollars. Again, stablecoins are almost universally pegged to the U.S. dollar, so Iran is still accepting dollars, just dollars that don’t touch the U.S. banking system as an intermediary.

From a U.S. policy perspective, this is arguably a better outcome. Every ship that pays the IRGC’s toll slash bribe in stablecoins rather than RMB is continuing to transact in dollar-denominated assets and preserving dollar dominance in the global oil trade. Even if it’s not a trade we particularly want to support. The alternative, yuan-based payments, likely flow through CIPS and are not only opaque to the West but actively fuel China’s parallel financial system in ways that could outlast this conflict.

If Iran’s terror toll slash bribe system lasts, we should look to stablecoin volumes in the coming weeks as a proxy for dollar resilience. A world where bribes to pass physical chokepoints controlled by the United States’ enemies are priced and settled in USDT is a world where the dollar remains the unit of account for global commerce, even when the U.S. financial system is explicitly being cut out of the transaction.

For souls haggling with a psychopomp in the underworld, prospects weren’t so rosy. But in this world, life finds a way. Or, to coin a corollary, thanks to the ingenuity of the private sector through stablecoins, the dollar finds a way.1

Subscribe now

Despite a lot of hoopla about China’s nefarious master plan to dethrone the dollar, China still uses U.S. dollars. Lots of them.

The dollar is the world’s reserve currency and China, as the world’s second-largest economy, accumulates piles of dollars from trade and conducts a significant amount of its international commerce and finance in USD. So, perhaps reasonably, China wants to process dollars on its own terms. Over decades, China has assembled domestic and international options for dollar clearing and settlement — all of which have varying degrees of visibility to the American financial system.

This week we cover a quick snapshot of three rails, from most U.S.-connected to least, that allow China to process dollars. Note that we do not talk about China’s Cross-Border Payment System (CIPS) because it only processes RMB, not USD.

USD CHATS (Clearing House Automated Transfer System)

Let’s start with the most visible rail. USD CHATS is Hong Kong’s real-time gross settlement system (every payment settles individually and immediately) for U.S. dollar transactions. This system makes sure money actually moves when international banks (mostly licensed in Hong Kong) transact with each other in dollars. It was launched in 2000 to solve a practical problem: because Fedwire only operated during U.S. business hours, banks in Hong Kong settling transactions in dollars had to wait up to 12 hours for their transactions to settle in New York. This left them exposed to the risk that a counterparty could fail in that window (this is called Herstatt risk, after the 1974 collapse of a bank in Germany that had received Deutsche Marks but hadn’t yet delivered dollars in return, which wiped out a bunch of counterparties mid-settlement).

Banks participating in USD CHATS hold pre-funded dollar accounts at HSBC, and dollars are settled between banks locally and immediately during Asian business hours. The system handles not just interbank transfers but also stock market settlements, check clearing, and foreign exchange transactions across multiple currency pairs. Today it is one of the only large-value dollar payment systems in the world that operates outside the United States, with over 30 Chinese state-linked institutions now among its direct members and monthly transaction volumes exceeding $2 trillion. It is a major offshore valve for dollars.

The growth of USD CHATS reflects Hong Kong’s continuing role as China’s primary offshore dollar hub for trade payments, investment flows, hedging, and securities settlement — even as Beijing promotes the use of RMB elsewhere. In November 2023, Hong Kong Exchanges and Clearing launched a major tech upgrade that shortened the time between IPO pricing to trading from five days to two days and moved large volumes of IPO subscription money, refunds, and allotment payments from slow batch processing to direct real-time transfers through CHATS — causing the sharp jump in monthly transaction volumes in November 2023 and a permanently higher baseline afterward.

This rise in activity was likely driven by better tech. However, the broader policy context is worth noting. Just weeks earlier, at the October 2023 Central Finance Work Conference, Xi warned that “a small number of countries treat finance as tools for geopolitical games” and that financial sanctions “have presented new challenges to maintaining financial security.” Additionally, in December 2023, the United States expanded its secondary sanctions toolkit by issuing Executive Order 14114, which authorized penalties on foreign financial institutions facilitating transactions with Russia’s military-industrial base — a move widely seen as increasing pressure on third-country banks (including those in China) involved in sanctions evasion.

The timing of these events is likely coincidental, but they reflect a political environment in which Beijing has every incentive to deepen — not reduce — its capacity to process dollars outside American visibility. Talk about subtext!

Proprietary internal systems

Let’s take a beat to explain how the big four Chinese state-owned banks clear payments. For a long time, these banks cleared U.S. dollar transactions mainly through foreign correspondent banks. Eventually, these Chinese banks established U.S. branches as another option for dollar clearing. Bank of China went first in 1981 and then the rest followed starting in 2008. Establishing branches in the U.S. gave the Chinese banks a master account at the Federal Reserve and the ability to settle on Fedwire.

Given the global reach and sheer volume of transactions flowing through these banks, I wondered to what degree they tried to clear payments within the bank network using a book-to-book transfer (a payment that moves between two accounts at the same bank). I found that China Construction Bank (CCB) and Industrial and Commercial Bank of China (ICBC) have both built proprietary platforms to do exactly that. CCB developed its Global Multi-Currency Payment System (GMPS) which automatically routed each payment across two channels — book transfer or Fedwire. ICBC built a parallel system called FOVA, launched in 2006, which connects its domestic and overseas branches so they could process payments, remittances, and settlements on a single integrated platform. For GSIBs like ICBC and CCB, with their vast global branch networks and enormous transaction volumes, this internal book-to-book capability is a significant advantage. It allowed large volumes of USD payments to be settled entirely within the bank’s own ledger, often bypassing Fedwire and external correspondents altogether, which in fairness they still use.

An important note: There is no direct mention of GMPS or FOVA in either of these banks’ U.S. Resolution Plans (mandatory filings that every foreign bank with more than $50 billion in global assets must submit to the Federal Reserve). It’s possible these systems are no longer operational or have changed. But what we are trying to highlight here is China’s largest banks have publicly said they can and will process dollar payments book-to-book. I know that this is common for large banks with enormous pools of global liquidity. Many of those banks are our friends. It feels a lot different knowing that our greatest strategic adversary can use USD and avoid touching Fedwire or CHIPS entirely if it needs to.

CDFCPS

This last rail is more obscure. The China Domestic Foreign Currency Payment System (CDFCPS) is a real-time gross settlement system developed by the People’s Bank of China and launched in April 2008. This onshore system clears and settles foreign-denominated transactions tied to domestic trades of goods and services (for example, an international company pays a domestic Chinese supplier in dollars). It can process payments in eight currencies: USD, HKD, GBP, EUR, JPY, CAD, CHF, and AUD — but data (albeit dated) suggest that USD dominates by a wide margin. Very little information is available on this system and it appears, judging from China’s Payment System Reports, that the name was changed to China Foreign Exchange Payment System (CFXPS) in the early 2020s.

Onshore volumes have surged in recent years alongside China’s expanding foreign trade, profit repatriation, outbound investment, and growing activity in FX derivatives and securities settlement. In Q2 2025, for example, this system processed 1.7 million transactions worth RMB 10.12 trillion (a daily average of 27,600 transactions or RMB 165.837 billion), a big increase from earlier periods.

Dedollarization is complicated

The RMB’s share of China’s cross-border payments has risen, and use of CIPS (China’s cross-border RMB payment system) has grown. But China’s absolute volume of dollar clearing continues to expand through diversified routes: highly visible offshore clearing in Hong Kong, more controlled onshore clearing via CFXPS, and nearly invisible internal bank ledgers.

Several of these systems developed in response to constraints in U.S. payments infrastructure, including Fedwire’s restricted operating hours or the slow processing speed of correspondent banks. The U.S. has started tackling these constraints with real-time payment initiatives like FedNow and RTP or discussion of expanded Fedwire operating days. Implementing and adopting these initiatives will become a matter of national interest. Inefficiencies in our payment systems invite the rest of the world to build workarounds that may increase demand for dollars, but exist outside America’s visibility and control — China has done exactly that and, in a sense, domesticated the dollar.1

Subscribe now

Money Beyond Borders: Global Currencies from Croesus to Crypto
by Barry Eichengreen (Released today!)

A 2,500-year history of international currencies that reveals new insights about the future of the U.S. dollar—as well as crypto and central bank digital currencies

The risk of any historical accounting of international currencies is that it reads like the Book of Genesis:

And unto Athens was born the silver owl; and the owl begat the Alexander; and the Alexander begat the denarius; and the denarius begat the solidus; and the solidus begat the dinar; and the dinar begat the florin; and the florin begat the piece of eight; and the piece of eight begat the guilder; and the guilder begat the pound sterling; and the pound sterling begat the dollar.

And the dollar reigns supreme over the earth. Amen!

Money Beyond Borders avoids any such tedious recitations. Barry Eichengreen, a professor of economics at U.C. Berkeley and one of our nation’s foremost macroeconomists and economic historians on the dollar, writes with a strong narrative and humor sorely lacking in economic history. He generously provided Hegemoney with an advance copy of his new book for review.

Jess is an economist. I am not. As a rule I am suspicious of any book with “crypto” in the title. I have only served as a lowly government or tech staffer, but I read Bloomberg every morning and get a queasy feeling whenever I see a new headline about the death of the dollar, the currency in which I am paid my wages and buy bread. I know a bit but not enough about international currencies — which makes me the perfect audience for this book. Eichengreen has written a very good primer for economists and non-economists alike.

International, strong emphasis on the national

Much of Money Beyond Borders is about the tension in the international use of a national currency. A nation mints a currency to encourage domestic trade and pay the troops, but either vigorous traders or vigorous troops eventually lead that national currency to start playing a major role in international trade and financial services. The tension is between a world that wants a nation’s currency to be one thing, and a domestic audience who wants the currency to be another thing. Nations cannot be divorced from the international circulation of their currencies (despite John Maynard Keynes’ best efforts with the bancor).

There may be no better illustration of this than CNN’s recent reporting that Iran is considering letting container ships through the Strait of Hormuz provided the oil cargo is traded in Chinese yuan. In other words, Iran has a standing policy to blow up any vessel carrying oil traded in U.S. dollars. Almost all of the world’s oil is traded in U.S. dollars — now, neutral nations shipping oil traded in American currency for commercial convenience risk being fired upon by an IRGC missile fusillade. It is no wonder that shipwrecks bearing chests of once-invincible currencies now litter the ocean floor. Whether it makes any sense to Americans at the pump is a different matter.

Return of the strong states

Eichengreen by his own admission is no numismatist, but by studying the fall and rise of coins across history — the denarius (Rome), the solidus (Byzantium), or the piece of eight (the Spanish Empire) — we come to see how great international currencies “must be issued by strong states.”

A sort of recipe emerges. Strong states are those with the:

• Political structures to provide checks and balances (creditors represented in governing bodies, barriers to unilateral debasement)

• Administrative and regulatory capacity to mint and coin with high uniformity (quality assurance, regulated provision, liquidity)

• Military capability to defend their borders and institutions (geopolitical security, safe-haven effects)

Currencies were created both to encourage trade and commercial activity, but also to ensure the sovereignty of a nation. Among empires, an obvious function of currencies was to pay soldiers out on the frontiers (“soldiers” coming literally from those paid in Byzantium’s “solidus” coin, as Eichengreen notes) who also act as a distribution channel for spreading that currency in and beyond occupied territories.

The seeds of destruction

Alas! Per Eichengreen, “International currency status is not forever.” A consistent theme of his survey of ancient currencies is that “widespread international use of a national currency may itself be a factor in economic and geopolitical decline.” This is very interesting.

Eichengreen shows how an evolutionary pattern emerged in the late Middle Ages: a currency begins in trade, then adapts into trade finance, and finally specializes in pure financialization (trading financial instruments often without underlying physical goods or services). Florence and the Netherlands, for example, took a path of “starting out as a merchant, moving into merchant banking, and then becoming bankers pure and simple.”

Financialization appears to have domestic side effects including a decline of industry and the rise of speculation. An in-demand international currency is an over-valued currency, which makes exports less competitive and hollows out a country’s industrial capacity. Meanwhile, financial instruments become a more attractive investment than factories, so everyone piles into speculative financial products instead of building things. Perhaps this all sounds familiar? It is jarring to read how hard nations with international currencies tried to stave off speculation throughout history — given how fantastically speculative the American economy feels now (uh oh!).

And so a nation with an international currency becomes a global financial power ”at the expense of the industrial and commercial activities that are the fundamental sources of economic and military prowess.” Imperial overreach or war (victories and defeats can be equally as expensive) often finish a currency off. Eichengreen doesn’t dwell on the parallels to modern America: he is positive on the benefits of globalization and exorbitant privilege granted to America by the dollar, but his analysis on the downfall of currencies would fit neatly into a manifesto by a new torpedo company in El Segundo — America as a nation that has neglected its infrastructure, captured by rampant speculation, and rife with self-dealing by elites. A world where, as in London during the reign of the pound sterling, “the best minds were being drawn into finance rather than industry . . .”

Still on top

A third of Money Beyond Borders is dedicated to the rise of the dollar. The last third is dedicated to what comes next. Eichengreen is relatively measured: ticking through the top threats to the dollar, he finds them all coming up short, at least for now. China is a great commercial power, but doesn’t appear to want the exorbitant responsibility of a truly international currency so much as it resents America’s exorbitant privilege. Absent a commercial revolution elsewhere in the world combined with an implosion of the American economy, there are no worthy challengers. Still, our friends in Europe and enemies abroad beef up their monetary infrastructure and wait for a crisis (you will have to read the book for Eichengreen’s theories on a potential future of international currencies bifurcated between China and the U.S.).

It would have to be a mighty crisis. For now, acute chaos, even chaos that the United States stirs up, benefits us: ”Not for the last time, the dollar, its safe-haven status intact, benefited from macroeconomic volatility and geopolitical uncertainty, even volatility and uncertainty to which the United States itself contributed.” See also, the recent hard rally of the dollar post-Iran strikes.

A greater challenge, not explicitly addressed by Eichengreen, may be domestic support for an international dollar. The benefits of an international dollar are tangible (lower borrowing costs, insurance against financial shocks, leverage with sanctions) but could be relatively abstract to an Iowa primary voter. The costs hit closer to home (empty factories rusting! rampant speculation!). Bankers like an international dollar, but workers whose exports are being depressed understandably may not. During the rise of the dollar, America put up with a lot of unfair trade practices post-WWII as the cost of getting the rest of the world on their feet, dollars in hand. This has obviously been of benefit to the United States in the long run, but going forward an international dollar will need a better PR strategy — a stronger narrative for the well-established case for dollar dominance and why it requires us providing a global public good.

Pax dollara

“International currency status is not forever,” again, per Eichengreen.

Why not? The United States checks all the boxes for Eichengreen’s recipe of strong states and strong currencies: a strong military, a democratic republic with checks and balances, deep and liquid markets open to foreigners, price stability, an enormous and dynamic economy, broad international alliances, and a central bank that steps in to stabilize financial markets.

Eichengreen frames the rise and fall of currencies as inevitable, with the caveat that strong currencies sometimes outlive strong states. Francis Fukuyama famously saw Western liberal democracy as the ideological “end of history” — the “end-point of mankind’s ideological evolution” and the “final form of human government.” Perhaps the U.S. dollar can be an “end of international currency.” It would only require a stable and well-defended commercial republic that can resist the worst temptations of financial speculation and imperial overreach…

But Eichengreen doesn’t take his book this far afield. I’ll be curious to see what staffers in Washington or engineers in San Francisco take away from his book as lessons for actively securing the role of the dollar. At the very least, anyone in Silicon Valley hoping to build the future of currencies would benefit from Eichengreen’s study of the past.

Yes, the dollar has its wobbles. The standard concerns are addressed: fiscal insolvency, attacks on the Federal Reserve, and so on. But put in perspective against the rocky history of international currencies that lurch from strength to strength despite outright failures or defeats — they feel relatively minor. Eichengreen, for his part, advises prudence, coherence, a commitment to the rule of law and the separation of powers, and the honoring of commitments to foreign powers. A lot to hope for in human affairs.

Subscribe now

In 1974, Nixon’s Treasury Secretary William Simon took a transatlantic flight to Riyadh, over the course of which he (allegedly) drank so much whiskey that he rolled off the plane dead drunk — and sealed a deal with the Saudi King Faisal: the United States would buy oil from Saudi Arabia and provide the Kingdom with military aid, and in return, the Saudis would plow billions of dollars from their oil revenues back into U.S. Treasuries. And so the petrodollar was born: a U.S. dollar earned through crude oil exports and recycled into dollar-based assets.

Over the past few years, many commentators have declared the death of the petrodollar. The petrodollar is not dead. Its role is different, but it gave us something great.

Petrodollars are no longer the largest driver of the offshore market

For decades, petrodollars were the backbone of the offshore dollar market (basically, dollars in banks outside the U.S.). Gulf states earned dollars from oil sales and deposited those dollars at European banks. The European banks then recycled those dollars as loans to other countries, often emerging markets. IMF research showed that in the 1970s, 44% of earnings from oil sales showed up as deposits in banks, mostly in Europe — and also that the foreign debts of 100 oil-importing developing countries were estimated to have increased by 150% between 1973 and 1977, likely a direct result of petrodollar deposits. In the 1970s, the offshore dollar market and the petrodollar recycling machine were essentially one and the same.

However, petrodollars are less important for creating dollar assets than they used to be. Another IMF study documented that the share of oil revenues converted into deposits at banks fell from 44% to approximately 27% in the early 2000s. I wasn’t able to find more recent figures, so I updated this analysis using Bank of International Settlements (BIS) Locational Banking Statistics data on USD-denominated deposit liabilities at participating banks for 18 oil-exporting countries, divided by annual current account surpluses from the IMF World Economic Outlook database, and frankly the results surprised me.1

Our methodology for the early 2000s (2001–2006) spat out a figure of approximately 21% of oil revenues held as dollar deposits at foreign banks — reasonably consistent with the IMF’s 27% share, given a slightly differing approach. But in the next period, 2007–2013, that share had fallen to approximately 13%. In the most recent period with available data, 2018–2023, it has collapsed to about 6%. Given the data limitations, the estimates likely represent a lower bound rather than the true level of bank intermediation. The directional trend which shows a steady falling share is, however, what matters.

Just to pull out one illustrative year, in 2022, oil exporters collectively earned a current account surplus (more earnings from exports than imports) of $901 billion. From that $901 billion, deposits at BIS reporting banks from oil-exporters only increased by a net of $24 billion. That is a bank intermediation share of 2.7%. So, based on our methodology, oil exporters are no longer putting their petrodollars in banks.

And yet, the offshore dollar credit market continued to grow. More BIS data shows that the offshore dollar credit market stood at $2.5 trillion in 2000. By Q3 of 2025, it had reached $14.2 trillion, a six-fold increase. This growth was steady, interrupted only briefly by the 2008 financial crisis and the 2022–2023 Federal Reserve tightening cycle.

This tells us that the dollar is very structurally resilient. Petrodollars seeded the offshore dollar market; they were the original source of dollar liquidity outside the United States. But the offshore dollar market has since developed its own momentum, driven by corporate dollar bond issuance, dollar-denominated trade finance, and the borrowing needs of emerging market governments and multinational corporations. The offshore dollar market no longer needs the petrodollar to grow.

Petrodollars are also significantly less important to U.S. Treasuries

Petrodollars were designed to create a structural demand for the dollar and U.S. Treasuries. And that they did. In the mid-1970s, the Arab Gulf monarchies became the largest single source of new credit for the United States. From 1974 to 1976, OPEC foreign investments totaled roughly $125 billion, a quarter of which flowed directly into U.S. banks or Treasuries.

Less so today. Oil exporters are still large purchasers of Treasuries but nowhere near as significant for demand as they were in the 1970s. Saudi Arabia, the UAE, Kuwait, and Oman — combined — held $149 billion of U.S. Treasuries in 2012. By 2025, they held $311 billion. While that sounds like a lot, their new purchases only covered 2% of deficit spending in 2025, versus roughly 10% of deficit spending (of just Saudi holdings!) during the first few years of the Reagan administration. Granted, our deficit spending was much smaller back then.

There are more petrodollars than ever, they’re just going elsewhere. In the 1970s, oil revenue flowed into Western banks and U.S. Treasuries practically by default — there were so few alternatives. Today, Gulf states have built some of the largest sovereign wealth funds that deploy capital in ways that would be completely alien to Richard Nixon. Saudi Arabia’s Public Investment Fund manages nearly $1 trillion in assets, with 80% of that portfolio directed at domestic investments and megaprojects. Abu Dhabi’s and Kuwait’s sovereign wealth funds are now ranked among the top ten shareholders in Chinese A-share listed firms, and Gulf sovereign wealth funds invested $9.5 billion into China over the course of 2024.

The petrodollar still exists, but rather than being recycled through London banks into loans for emerging markets like Brazil, it is being deployed into Saudi domestic projects, Indian tech startups, Chinese equity markets, and, most importantly, Premier League football clubs.

But petrodollars still dominate commodity pricing

Petrodollars aren’t what they used to be, but the dollar remains dominant in global commodity markets and that’s really all that matters. Oil pricing dominance has led to commodity pricing dominance and every commodity benchmark, from Brent crude to copper to soybeans, is still quoted in dollars. This pricing convention forces commodity importers to hold and trade in dollars, creating a structural demand for USD independent of whether or not Saudi Arabia buys Treasuries. The petrodollar system is now a pricing mechanism — it matters less where the money goes after an oil sale and more that the sale itself happens in dollars.

China, unsurprisingly, doesn’t love this state of affairs, though their efforts to combat it are marginal in scale (for now). In 2023, China used the digital yuan to purchase one million barrels of oil at the Shanghai Petroleum and Natural Gas Exchange — a token transaction, but the first cross-border oil settlement in eCNY. That same year, the People’s Bank of China and the Saudi Central Bank signed their first bilateral currency swap agreement, covering up to RMB 50 billion for three years, and Bank of China opened its first branch in Riyadh to facilitate renminbi settlement. Then in 2024, Saudi Arabia joined mBridge — a multi-central bank digital currency platform developed with China, the UAE, Hong Kong, and Thailand to enable cross-border settlements outside the SWIFT network.

Russia, meanwhile, has been redirecting substantial oil exports into yuan and rupee settlement. These are all real situations worth monitoring, but in context: around 80% of global oil trade still happens in dollars, and S&P Global forecasts that yuan-based oil trade will take decades to scale meaningfully. Oil exporters are only willing to accept yuan for crude oil if they can spend it, and the renminbi isn’t broadly used in international trade and finance, leaving few places for those RMB proceeds to go.

William Simon passed away in 2000. I hope he is drinking brown liquor in the afterlife. His handshake deal with the Saudis is also dead. What we’re left with is both less tangible and more stubborn — a convention that prices almost all commodities in dollars, embedded in every futures contract, trade invoice, and hedging desk on the planet. The dollar lives. And for that I raise a glass to Secretary Simon.2

Subscribe now

Within 72 hours of the first strikes on Iran, six U.S. service members were dead, Dubai International Airport was closed, oil had spiked higher, the Middle East was in open regional war — and the dollar was up over 1.5%.

The obvious explanation here is that the dollar is the world’s ultimate safe haven asset, and USD rises when geopolitical risk spikes.

However, this hasn’t been the case historically.

History shows short-term weakness or a muted reaction after strikes

After the dollar surged on Monday, I wanted to see if this was a consistent pattern following kinetic U.S. engagement, so I looked at the behavior of the dollar index (DXY) immediately after U.S.-initiated strikes going back to 1991 — 19 events in total, from Desert Storm to the Syria strikes to the Soleimani assassination (see footnote for an explanation of the methodology for selecting these strikes)1. The pattern is counter-intuitive for a safe-haven asset. Instead of roaring higher in a universal risk-off trade, in the immediate days (1–3 days) after the strike the dollar was either down or relatively flat (moving less than 0.5%). On average, the dollar index moved -0.23% on the first trading day following the attack, and -0.15% a week after the first strike.

The data suggests that historically the dollar does not see a surge in safe-haven demand in the immediate aftermath of a U.S.-initiated strike.

Why does the dollar typically fall right after a strike?

The short-run mechanism isn’t complicated once you unpack it. U.S.-initiated military action in the Middle East can easily become an inflationary event. Oil prices rise on supply disruption fears (less oil = more expensive oil) and shipping costs spike (very costly and long detour to avoid the Strait of Hormuz). The cost of shipping oil from the Middle East to China just hit an all-time high, increasing almost 100% by Monday as some insurance companies canceled war risk coverage. That makes energy more expensive. Higher oil prices act like a tax on households and businesses, weighing on growth, stoking inflation, and putting the Fed in a difficult position as they balance controlling higher prices against cushioning growth. That combination has historically put downward pressure on the dollar, even when American oil companies are benefiting. Markets are forward-looking, so just the anticipation of this disruption and subsequent inflationary pressure can create more dollar sellers.

The market may also start to price in a longer-term conflict. The academic literature is clear about what happens to currencies over the arc of a war. To fight wars, governments spend money. That spending gets financed through debt. Although previously the US had raised taxes and cut spending to pay for wars, the post 9/11 playbook moved us into the era of debt-financed conflict. More debt means more issuance of U.S. Treasuries, which means more dollars in circulation — another structurally inflationary factor. A study by Christopher Warburton found that the dollar depreciated at an average monthly rate of 1.2% during the Iraq War.

Are the Iran strikes different?

And yet, this week we saw oil and the USD surging higher together. A few thoughts on why this time could be different:

The short squeeze. Before the first bomb dropped, the dollar was already down 9% over the past year. According to Bank of America’s fund manager survey, shorts against the dollar reached their highest level since 2012. When that many people are leaning the same way, it only takes one unexpected catalyst to trigger a cascade of forced covering. The death of Khamenei could have fueled a panic closing of crowded shorts that contributed to the stronger dollar.

Market dysfunction. Okay, hear me out. This is the first time the Strait of Hormuz, which transports one-fifth of the world’s oil, has effectively closed and this has likely jammed the plumbing of the financing of the global oil trade. Trading firms with derivative positions suddenly need dollars to cover margin calls on positions moving sharply. At the same time, letters of credit used to finance the frozen shipments tie up dollars on banks’ balance sheets, effectively locking them until the trade can be resolved. Buyers also need replacement oil, which requires new letters of credit and additional dollar commitments. Multiply that across a lot of tankers and you get a sudden scramble for dollars.

Macroeconomics. The macro backdrop today is the opposite of almost every previous strike episode in the dataset. During the majority of these military campaigns, the Federal Reserve was actively cutting rates or sitting near cycle lows. This time, the Fed has paused its monetary easing and some officials are considering if it is time to resume tightening. One of the few times that saw dollar strength following a strike was after Operation Poseidon Archer (2024–2025) and this coincided with the Fed Funds Rate at its cycle peak. The implication is that when rates are expected to be higher in the U.S. (i.e. tightening cycles) compared to similar securities, money will chase the higher yield regardless of what is happening with the military.

Structural geopolitical bid. Academic research argues that international reserve currency choice is driven not only by economic factors like market size, capital markets, and credibility, but also by geopolitical ones. Barry Eichengreen has noted that military alliances can boost a currency’s share in a partner’s foreign reserves by roughly 30 percentage points. As we face the potential of prolonged conflict, one could argue that dollar asset demand from our allies is lending support to the USD.

The scale of potential change. History doesn’t help us here. Iran has been the central organizing adversary in Middle Eastern geopolitics since 1979 —shipping weapons to the Houthis, supporting proxy militias in Iraq, arming Hezbollah in Lebanon, and funding Hamas in Gaza. For nearly half a century, every risk premium embedded in oil markets and every concern over nuclear proliferation bore the fingerprints of the Islamic Republic. Markets may be looking past the immediate chaos and asking genuinely new questions: what does the world look like without this Iranian regime and what will the next iteration look like? Those questions are balanced against an older and weightier fear: could this be the start of a worldwide conflict?

History strikes back

I’ve focused only on immediate price action — the first 72 hours of a conflict with Iran that could last months or years. The rise in the dollar is supported by technical, structural, and macro factors, and those may be enough for continued support. If the dollar falls over the next few weeks, it doesn’t mean it is no longer a safe haven. Maybe the conflict is subsiding or maybe history is just reasserting itself.2

Subscribe now

“The boycott is an infinitely more terrible instrument of war. Excepting our own singularly fortunate country, I can not think of any other country that can live upon its own resources.” — Woodrow Wilson (1919)

Here’s a short primer on how to use economic statecraft: When you want another country to do something, you take a look at your economy and identify a few goods or services that the target country depends upon — ideally something they really depend upon — then you turn that dependence into a weapon: withholding access, taxing it, etc., until the country shapes up and does what you want. This lets you leverage commerce for political means. Economic statecraft is both effective (every country needs grain!) and tempting (no need to send in the army!), so much so that any one tool is rarely viable for long, as target countries find workarounds. And what then?

For a moment, it seemed like tariffs might become the new sanctions, but the Supreme Court struck down the Trump administration’s tariffs issued through IEEPA, ruling that they lacked legal authority. IEEPA tariffs are now off the table. In response, President Trump announced a new, universal 15% (or maybe 10%?) tariff, using Section 122 of the Trade Act of 1974, which is legally stronger but strategically weaker (can’t target specific countries, capped at 15%, and expires in 150 days). That 150-day clock is running, and though the White House has backup options, there’s no clear path to rebuild the full tariff regime by July. At the meta level, our trading partners are recalculating whether U.S. tariff threats are still credible: the deals we struck with China and Canada are in limbo, and the European Union has already paused ratification of its trade deal.

As the door closes on IEEPA, the administration will look for a window. This is nothing new. Since antiquity, states have turned to economic coercion to achieve foreign policy aims, and when one tool stopped working, they invented another. Innovation and statecraft have always gone hand-in-hand, so, in a bit of a departure from our regular Hegemoney content, I rounded up a brief and incomplete list of examples of statecraft innovation through history — with many thanks to my brother, a history professor, who taught me about the Salt War.

Disciplining rogue Hellenic states

One of the earliest recorded uses of economic statecraft dates to the fifth century BCE, when Athens issued the Megarian Decree. The decree banned the citizens of the city-state of Megara from Athens’ markets and trade within the Athenian maritime empire — a move likely driven by political tension and commercial rivalry.1 Historians remember the decree less for its effectiveness and more for its consequences: many consider it a trigger for the Peloponnesian War.2 Still, it marked a critical innovation: the use of economic ties to achieve political aims and a recognition that blocking access to markets could be as devastating as a Hellenic phalanx.

Feeding (or starving) Rome’s hungry legions

Over the centuries that followed, rulers repeatedly turned to economic weapons. In the late Roman Republic, the empire’s reliance on grain was a sign of its strength as much as it was a vulnerability. An expansionist power like Rome required grain to both feed a growing civilian population and sustain military forces across the Mediterranean and Europe. During the Third Servile War (73-71 BCE), Spartacus led his army to the Strait of Messina, intent on crossing over to Sicily to escape the mainland and incite another slave revolt. While his revolt failed, some historians argue that Spartacus would have assessed that Sicily’s role as the breadbasket of Rome made it an appetizing target (sorry) and invaluable negotiating chip.

Centuries later, Cleopatra VII, the last Queen of Ptolemaic Egypt, understood the political leverage of Egypt’s agricultural wealth. Rome’s reliance on grain supplies from Egypt gave Cleopatra leverage over Rome, and it’s possible she used this leverage to gain preferential treatment from Rome and its emissaries, imitating earlier tactics of the Ptolemies and Greek city-states in the wake of the wars of the Diadochi. When Octavian conquered Egypt and absorbed it into the Roman Empire, he forbade Roman elites to enter Egypt without his permission — preventing rivals from exploiting Egypt’s agricultural abundance. Grain was finally weaponized against Rome during the Gildonic War of 398 CE.3 The Roman governor of North Africa, Gildo, sought to form a separate state from Rome by cutting off the empire’s access to grain. He did not succeed; according to Gibbon, the Roman legions defeated Gildo’s army in a nearly bloodless battle, and he was thrown into a dungeon by his former subjects while trying to flee. But he deserves some credit for understanding that commodity dependence can be used as leverage.

Silken espionage

The first known act of industrial espionage occurred under the Byzantine Empire, the dominant economic player in the 6th century Silk Road trade. Constantinople was Europe’s primary gateway for Asian luxury goods. However, the lucrative overland route ran through Persian-controlled lands, allowing the Persian Sassanid Empire to enrich itself through tariffs and transit tolls. Determined to break this monopoly, Byzantine Emperor Justinian I sought the secrets of Chinese silk from the Far East to create a local silk industry in the Roman East. Justinian sent two Nestorian Christian monks into China under the guise of missionary work, and they successfully smuggled out silkworm eggs in hollowed-out bamboo canes. The Byzantine Empire soon established its own silk industry — cutting out both Chinese and Persian middlemen. This was a striking innovation in economic statecraft: the fusion of intelligence, trade, and industrial policy to reshape the flows of commerce and power.

Spiritual warfare

By the late Middle Ages, the papacy had become adept at using spiritual networks for political and economic coercion. An “interdict” — a suspension of religious services — functioned as both moral punishment and economic warfare, depriving entire regions of sacraments and trade. In 1376, during the War of the Eight Saints, Pope Gregory XI placed all of Florence under interdict.45 Going beyond earlier spiritual sanctions, Gregory not only excommunicated the city’s leaders and suspended all ecclesiastical rites within Florentine territory, but also authorized the confiscation of Florentine property and the arrest of Florentines throughout papal lands. The sanction was unevenly enforced across the papal states and didn’t paralyze commercial activity, but it struck at the foundations of Florentine prosperity6, marginalizing the diaspora and hindering trade with the city. Gregory’s act represented an early fusion of religious authority with economic interdiction. Use what you got.

When faith failed to bend rivals to papal will, fiscal innovation and military engineering were often effective. Enter the Salt War of the 1540s: The Papal States instituted a salt tax on all territory within its sphere of control. The Italian city of Perugia, while nominally under Papal control, possessed near complete autonomy and rejected the tax outright. Pope Paul III responded by officially annexing Perugia and constructing the Rocca Paolina, one of Italy’s most imposing Renaissance military fortifications and a clear symbol that Perugia’s semi-independence was at an end. The Rocca served not merely as a military stronghold but as a monument to economic subjugation — a physical reminder that fiscal sovereignty flowed from obedience to Rome. Through taxation, confiscation, and a big fortress, the papacy showed how control over material infrastructure can secure political submission.

Total economic war

After the destruction of the French fleet at the Battle of Trafalgar by the Royal Navy, Napoleon recognized that British naval supremacy made an invasion of Britain impossible. So he turned to economic warfare, seeking to strangle the British economy through a continental-scale embargo. The Berlin Decree of 18067 established the Continental System, prohibiting all correspondence and trade with Britain and mandating the seizure of British goods in French or allied territories — designed to seal off the British Colonial Empire from European markets. Napoleon’s Milan Decree of 1807 extended the system, stating that any neutral ship that submitted to British search or paid British duties would be treated as British and subject to seizure.

Conceived as a total embargo, the Continental System quickly evolved into a sprawling, protectionist regime of tariffs, licenses, and customs controls that sought to starve Britain’s economy while financing France’s empire through tightly managed, “licensed,” and highly corrupt commerce. The experiment fused economic isolation with industrial policy, and forced continental Europe to develop domestic industries and administrative controls that foreshadowed modern wartime economies. In Napoleon’s hands, the embargo grew beyond a mere tool of deprivation into an early form of economic system-building — a precursor to the total mobilization of markets that would define the twentieth century8.

The First World War then birthed economic warfare on a multilateral scale, as Allied Europe pioneered a “financial blockade” that blacklisted enemy firms, restricted loans, seized German assets, and coordinated control over shipping, insurance, and trade9. Capital markets and financial networks were mobilized as instruments of war. This period also gave rise to the idea that economic pressure could replace direct violence. British statesman Robert Cecil argued in 1916 that there should be a tool that “put considerable pressure on a recalcitrant power without causing excessive risk to the power using it.”10 The League of Nations first formalized financial blockades as a collective instrument in the 1920s and 1930s, hardening an experiment with economic coercion into a permanent feature of international politics — even though early efforts against Italy proved uneven and ultimately ineffective.11

Arming the dollar

After 1945, Bretton Woods institutionalized U.S. financial leadership by tying global currencies to the dollar and the dollar to gold, while placing IMF and World Bank governance in American hands. The Bretton Woods system was designed to provide stability. But by concentrating clearing, credit, and reserves in New York, it created a coercive tool that later enabled finance to be used as a weapon — completing a long evolution from ancient embargoes to modern sanctions.1213

Over time, the dollar’s centrality in global finance turned access to USD into a lever. The Office of Foreign Assets Control (OFAC), born from its WWII predecessor “The Office of Foreign Funds Control,” in the mid-twentieth century institutionalized this power, with financial exclusion becoming a legal instrument of statecraft. What began as a tool to freeze Axis assets in World War II evolved into our precise system of modern sanctions.

The campaign against Colombian narcotraffickers in the 1990s demonstrated how cutting individuals and banks off from dollar clearing could cripple criminal networks. After September 11, this machinery got turbocharged. The U.S. Department of the Treasury redefined national security to include the financial system itself — targeting terrorists, proliferators, and their enablers through an expanding network of designations. As Juan Zarate observed in Treasury’s War, the attacks remade the department into “the nerve center for a different kind of warfare.”14

Access to the dollar system became a privilege, not a right. The U.S. harnessed SWIFT data to trace terrorist financing and later pressured the network to disconnect Iranian banks. By 2022, the coordinated sanctions campaign against Russia — freezing hundreds of billions in reserves, cutting major banks from SWIFT, and enforcing oil-price caps — showed how control over financial plumbing could rival traditional warfare in speed, scope, and consequence.

What is old is new again

A century ago, Woodrow Wilson warned that the economic blockade was “an infinitely more terrible instrument of war.” To stay terrible and effective, economic statecraft will have to evolve. Persia monopolized the silk route, so Justinian sent monks into China. Britain ruled the seas, so Napoleon shut every European port to British goods. Terrorists exploited global finance, so Treasury turned the dollar system into a weapon. The Trump administration, disarmed of its favorite tool, is searching for the next one. They will find it — in old laws or new technologies. As Edward Fishman observes in Chokepoints15 and elsewhere, when certain chokepoints lose potency, others emerge, and economic warfare will only continue to grow. Innovation is the central theme of the history of economic statecraft. The future will test how that ingenuity is applied.16

Subscribe now

The United States is in a bind. China, our main geopolitical rival, controls rare-earth refining and processing and is actively pushing to ensure rare-earth metals are priced and settled in Chinese renminbi. What’s a superpower to do? What America does best: financialization.

Last week, Reuters reported that the world’s largest derivatives exchange, Chicago-based CME Group, is developing plans to launch the first-ever futures contract for rare-earth elements — specifically a contract for neodymium and praseodymium oxide (NdPr), the primary rare earths used in permanent magnets for electric vehicles, wind turbines, and drones. Assuming you’d like to be competitive in the future of manufacturing, warfare, or energy, these are essential inputs.

If launched, the CME contract could become a widely-recognized, dollar-based (we love this), standardized price that:

1. Creates a reliable reference for pricing decisions and contract negotiations

2. Lets market participants financially hedge against extreme price swings caused by Chinese dominance in rare earths

3. Helps the U.S. take some pricing power from China, if paired with the right policies

What is a futures contract? A standardized, exchange-traded contract to buy or sell an underlying asset (e.g. oil, gold, or metals) at a fixed price on a future date. They are traded on exchanges like the Chicago Mercantile Exchange or London Metals Exchange (LME).

Why do we need them? The OG reason is that producers, consumers, and businesses use futures to lock in prices and protect against adverse price swings. Southwest Airlines saved about $3.5 billion on jet fuel costs over a decade because they loaded up on crude oil futures in 1998 at ~$11 per barrel (simpler times). Futures markets get producers, consumers, and speculators on the same platform to gauge future supply and demand expectations. They were the original prediction market except you’re betting on wheat prices instead of whether, I don’t know, Jesus will return in 2027.

How do they enforce USD dominance? Most major global commodity futures are priced and settled in USD, which means participants around the world must acquire dollars to trade, post margin, or settle contracts. This creates persistent, structural demand for USD, reinforcing the dollar’s central role in global commerce.

A rare-earth hegemon

China controls refining (70%) and processing (90%) of rare earths, which allows them to largely dictate pricing in this small, thinly-traded, and opaque market. Unlike widely-traded metals like gold, prices for rare earths have been set through negotiations between Chinese producers and global buyers (Raytheon, GM, companies that need rare earths to make things), and influenced by Chinese government export and production quotas.

In 2014, China established the Baotou Rare Earth Products Exchange. Baotou is a city the size of Chicago in Inner Mongolia, surrounded by 80% of China’s rare-earth reserves. By centralizing trading on the exchange, China made prices for companies across the rare-earth supply chain more transparent, though foreign participants typically have to access the market through intermediaries. All trades are spot trades (i.e. purchases for immediate delivery… if you hit “buy” you better have somewhere to put all that neodymium you are about to get delivered) and trades are settled in Chinese renminbi (RMB).

The exchange also just launched a rare-earth price index to give participants a benchmark to track daily prices. As China tries to direct more transactions through the exchange, global buyers are forced to settle in RMB (and therefore manage both price swings and currency exposure), positioning the renminbi as the primary, if not sole, currency for global rare-earth transactions — a stated ambition of the Baotou exchange chairman.

Futures contracts are not allowed on the Baotou exchange. This is ostensibly to limit speculation by retail traders, which is something of a pastime in China: Bloomberg recently reported on Merry Chen, a 42-year old homemaker in Hangzhou who “with no prior experience in derivatives . . . opened a futures account last Monday on the advice of friends” and blew 750,000 yuan trading gold futures.

But the futures ban could also have a strategic purpose: without a way to hedge against price volatility, rare-earth projects in the West struggle to secure financing from banks. The CFO of MP Materials recently complained:

“What good is it to invest billions of dollars if the second you turn your refinery on, prices go from US$170 to US$45?”

Banks require predictable cash flows to underwrite projects, but volatility in rare-earth prices with no way to hedge makes financial projections highly speculative. Perhaps for this very reason, Chinese exchanges have signaled an intent but announced no concrete timelines to offer rare-earth futures. This financing gap in the West could explain why major rare-earth projects frequently rely on backing from the U.S. government. Only Uncle Sam has the risk tolerance for the geopolitical premium that comes with China controlling pricing in rare earths.

So what can the U.S. do to take back some control of pricing in rare earths? In the 2010s, China actually faced a similar problem in the iron ore market, including a few dominant suppliers, many fragmented buyers, opaque pricing, and limited hedging tools. They attempted to solve their situation with futures.

Lessons from China’s iron ore futures

The largest buyer of a commodity doesn’t automatically get to call the shots on prices of that commodity. China learned this the hard way with iron ore (which is used to make steel for bridges, railroads, factories, etc.). In 2013, China imported over 70% of shipped iron ore, an incredibly dominant market share that translated into zero price-setting power because Chinese demand came from 7,300+ fragmented steel mills, while supply came from three coordinated mining giants (BHP, Rio Tinto, Vale).

Before 2010, these three mining companies would get in a room every year to negotiate regional prices with Japanese, Korean, and Chinese steelmakers, though the Japanese had the most influence. In 2010, the miners abandoned the annual negotiations, which had locked in prices for a year, because explosive demand from China kept pushing ore prices in spot markets higher (leaving billions on the table for miners). The miners instead tied their contracts to dollar-denominated spot market price indices like Platts.

China, by now the largest importer, still bemoaned their lack of pricing power. To rectify the situation, the Dalian Commodity Exchange (based in Dalian, a port city the size of Houston) launched an iron ore futures contract in 2013, which importantly included physical delivery and settlement in RMB. The other widely-traded iron ore contracts in Singapore and Chicago were cash-settled (did not include physical delivery) and priced in USD.

Physical delivery means that when the futures contract expires, you don’t just get or owe cash. You get the actual commodity. The physical thing. In this case: actual iron ore, showing up at an actual warehouse, requiring actual trucks to move it. I will never forget being a newly minted derivatives trader on the floor of the Chicago Board of Trade. At 6:30 AM and out of nowhere I heard a string of the most colorful expletives I’d ever heard in my life. The trader a few desks down had forgotten to close out his crude oil futures before the contract expired, and the clearing house was calling him to ask where he would like his 50,000 barrels of oil delivered. He had to scramble to find some warehouse in Louisiana willing to take delivery so he could sell the crude to someone who actually wanted it. Awkward.

Anyway! Physical delivery had some useful properties for China. First, it gave Chinese steel mills guaranteed access to physical iron ore at locked-in prices, protecting them from both price volatility and the more troublesome problem of not being able to buy iron ore when supply gets tight. Cash-settled futures hedge your financial exposure but don’t give you anything to throw in the blast furnace. Second, physical delivery created an independent Chinese price benchmark based on real transactions. Actual iron ore changing hands at actual Chinese ports drove Chinese prices, instead of Western price assessments, which industry observers believed were more favorable to (and preferred by) the mining giants.

The Dalian Commodity Exchange’s iron ore futures became the world’s largest iron ore derivatives market by volume. In 2018, China opened the contract to foreign traders, which boosted liquidity. By 2019, major international trading companies like Cargill and even Vale started using Dalian iron ore futures prices as the basis for some spot contracts with Chinese buyers, even settling transactions in RMB. Academic research showed the futures market was useful: it contributed 60–70% of price discovery, meaning futures prices were doing most of the work to figure out what iron ore should cost. Chinese importers now had a RMB-based tool to hedge and lock in prices.

Futures can only take you so far

The Dalian iron ore futures contract gave Chinese steel mills some useful things: renminbi hedging, huge trading volumes, and regional price influence. But it failed to give China truly global pricing power in iron ore for a couple reasons:

• Despite China’s status as top importer, the market was still a fragmented group of steel producers reliant on supply from the mining giants who preferred the dollar-denominated benchmarks, like Platts, that they adopted in 2010.

• While physical delivery was great for Chinese buyers, the Dalian futures required delivery at a Chinese port and that is not so convenient if you are literally anywhere else.

• The Dalian Commodity Exchange became wildly popular with Chinese retail speculators, creating volatility unrelated to actual iron ore fundamentals, which made foreign participants nervous about using it for serious pricing.

So while futures gave China a foundation to improve conditions for steelmakers, they weren’t enough. Beyond diversifying iron ore supply (spoiler alert: China just started importing ore from Guinea), China needed to unite its 7,000 steel producers. That moment came in 2022, when China formed the China Mineral Resources Group, consolidating more than half the Chinese steelmakers into a unified negotiating bloc — which is working. Last year, the Australian mining giant BHP agreed to settle 30% of its spot trades with China in RMB. And in December, China Mineral Resources Group forced Rio Tinto and Fortescue to abandon the dollar-based Platts index in contract negotiations. Rio switched to Fastmarkets (still dollar-based but less dominant), while Fortescue adopted an average including China’s RMB-denominated Mysteel index.

Major miners adopting China-based indices will probably only increase liquidity on the Dalian futures market and strengthen China’s hand in future negotiations — risking a self-reinforcing cycle where pricing power gradually migrates from West to East.

A mirror image for rare earths

The West now faces a similar challenge with rare earths, only in reverse: China is the major producer, and the West is the dominant consumer facing Beijing’s pricing power. A Chicago rare-earth futures contract would play the same role the Dalian iron ore futures played for China, creating a USD benchmark and hedging instrument.

But rare-earth futures face an uphill climb. The market is smaller, more fragmented (17 elements vs. 1 commodity), and more politically controlled than iron ore ever was. Even the contract design is harder than it sounds. The CME will need to pick a reference spec for NdPr and build independent verification infrastructure around it, neither of which is trivial. If initial participation is low, traders could be discouraged, depriving an illiquid market of the depth needed for reliable price discovery, hedging, and financing. The Dalian futures market also became wildly popular with Chinese retail speculators, creating volatility unrelated to fundamentals. Though it’s less likely, the same could happen with rare earths in the West if neodymium-praseodymium oxide becomes the new .

However, the strategic importance of rare earths is so obvious that we have to at least try. As Heidi Crebo-Rediker of CFR puts it:

“China’s global dominance of critical minerals supply and demand, paired with lack of commodity price sensitivity, gives Beijing control of global pricing power. China has weaponized this pricing power for the past two decades to put market-based mining companies out of business around the world.” (emphasis mine)

China’s iron ore futures alone couldn’t deliver pricing power in 2013, or 2015, or even 2020, until the China Mineral Resources Group coordinated buying power. And with these complementary changes, the Dalian iron ore futures became China’s first successful potential challenge to dollar dominance in commodity pricing.

The U.S. is quickly getting up to speed to mirror China’s strategy. The U.S. government’s Project Vault committed $10 billion in Export-Import Bank financing to create a strategic critical minerals stockpile. The Department of War has taken equity stakes in MP Materials, and established price floors for neodymium-praseodymium oxide (NdPr). And the U.S. is accelerating supply diversification with $1.6 billion in federal funding for USA Rare Earth, $600 million for Tronox’s Australian processing facility, and partnerships from Brazil to Australia.

A Chicago futures contract won’t immediately get the U.S. out of its rare-earth bind. But a decade from now, with liquid markets, government support, and engineering breakthroughs in processing and refining, rare-earth futures could be the platform that helps the West take back pricing power, secures access to the inputs upon which the future of energy and manufacturing depends, and ensures the world’s most strategic commodities are priced in USD1.

Subscribe now

Last week, Treasury Secretary Scott Bessent made an interesting comment that got front-page billing in the South China Morning Post but basically nowhere else.

US Treasury Secretary Scott Bessent said he “would not be surprised” if China were already looking into ways to challenge the US’ pre-eminence in digital assets, given Hong Kong’s efforts to develop the industry.

When testifying before the Senate Banking Committee on Thursday, Bessent said that there are “lots of rumours of Chinese digital assets” possibly being backed by something other than its currency yuan, such as gold, but that the US could not confirm such claims.

Secretary Bessent went on to argue that this was another reason to pass the crypto market structure bill, the Clarity Act, now. Immediately. Yesterday!

Here’s the interesting thing: China has blocked all crypto business activities (trading, transactions, mining, etc.) on the mainland, and Beijing is actively constraining Hong Kong’s ambitions to become a digital assets hub through regulatory pressure, policy oversight, and strict alignment with mainland priorities. Just last week, China banned all unauthorized offshore renminbi (RMB) stablecoins. Chinese regulators previously blocked Ant Group and JD.com from issuing stablecoins and directed large local brokers to halt any research publications endorsing stablecoins.

These are not the actions of a regime that is buck wild about becoming the crypto capital of the world. And that’s just on the regulatory front. In terms of appetite for digital assets, yes, Hong Kong has a sandbox, but it pales in comparison to the size of the American crypto market.

However, Secretary Bessent is on to something. The Chinese are absolutely trying to create an alternative to American financial dominance, but the threat isn’t coming from crypto.

China’s streamlined system for cross-border RMB

A little more than a decade ago, China launched the Cross-Border Interbank Payment System (CIPS) to help streamline cross-border RMB payments. Before CIPS existed, every time a Chinese entity wanted to send a payment to a different country in RMB, the transaction had to route through a fragmented network of correspondent banks and offshore clearing centers. These payments were rejected twice as often as other cross-border payments, typically due to translation issues between Chinese characters and Latin script alphanumeric systems used by the main international banking messaging networks like SWIFT.

CIPS fixed this with clearing, settlement, and messaging capabilities — messaging in particular (which includes instructions for clearing and settlement) made CIPS a partial alternative to the Western-dominated SWIFT, though that capability is limited to direct participants and only in RMB. This transformed China’s ability to use the RMB in cross-border payments. In 2019, CIPS processed only the equivalent of $5 trillion USD. In 2024, CIPS processed the equivalent of nearly $25 trillion USD.

All cross-border payment systems have a network effect that accelerates as more banks join. As of last June, CIPS had 1,690 participants (176 Direct Participants and 1514 Indirect Participants), across 121 countries. That month, CIPS forged its first direct partnerships with six foreign banks in the Middle East and Africa — crossroads regions increasingly looking for alternatives to dollar-based infrastructure. This was a huge development as direct participation had largely been limited to Chinese institutions (which indirect participants had to settle and clear through).

mBridge and the cross-border e-CNY

Sure, CIPS is concerning because it makes it easier to use RMB in traditional financial channels. But mBridge could represent a much larger channel for global trade and finance. mBridge is a joint project launched by the central banks of China, Hong Kong, Thailand, the United Arab Emirates, and Saudi Arabia, in partnership with the BIS, or Bank for International Settlements (which was originally established to supervise the settlement of WWI reparations!).

mBridge is a platform for central bank digital currencies, or CBDCs — digital money issued directly by central banks. It enables instant cross-border settlements without correspondent banking, SWIFT messaging, or the need for the U.S. dollar. Instead of routing through intermediaries, mBridge converts directly between national currencies on a shared ledger, cutting transaction costs by 50% to 70% and settling in seconds rather than the traditional three days. Unlike CIPS, which only processes RMB, mBridge is designed to be multicurrency — though the majority of volume on the platform is currently the e-CNY, China’s CBDC launched in 2021.

According to a paper by the Atlantic Council, mBridge has processed more than 4,000 cross-border transactions with a cumulative value of ~$55 billion, a near 2,500-fold increase in transaction value since 2022. Although still very small in comparison to traditional financial channels, this volume makes mBridge the largest cross-border wholesale CBDC project to date. The BIS left mBridge in 2024, stating:

. . . the project has been so successful that we can declare that we have graduated out. The BIS is leaving that project, not because it was a failure and not because of political considerations but instead because we have been involved for four years and it is at a level where the partners can carry it on by themselves.

In the retail payment space still dominated by Alipay and WeChatPay, the e-CNY is starting to crop up in cross-border payments. Laos has recorded its first cross-border e-CNY transactions from Chinese tourists, and China’s Yunnan Province — which borders Vietnam and Laos — has made cross-border digital yuan payments a key priority for 2026, including QR code payments at border crossings.

An interesting e-CNY upgrade

On January 1, 2026, China became the first country to launch an interest-bearing central bank digital currency, with verified e-CNY wallets now earning interest at rates matching ordinary demand deposits. This could give the digital yuan a structural advantage over zero-yield stablecoins in cross-border transactions. If there’s any China-related rationale for including stablecoin provisions in the Clarity Act, it would be here — but this misses the larger point (are you CNY what I’m CNY?).

China is making friends

Economic integration — i.e. more commerce between countries — creates the foundation for countries to settle trade in their own currencies rather than more liquid, international vehicle currencies like the dollar. China knows this and the residual effects of their efforts to to deepen its financial and trade ties with the world could be greater use of national currencies in trade.

Canadian Prime Minister Mark Carney made his first official visit to China in January 2026 — the first by a Canadian Prime Minister since 2017. His visit yielded a new partnership focused on energy, clean technology, and trade, with Canada aiming to increase exports to China 50% by 2030. China has recently signed similar partnerships across the globe, including a new ASEAN free trade agreement in October.

Beijing wants options

Gerard DiPippo of RAND makes an excellent point in a recent Geoeconomic Competition podcast.

“If China wants to become a financial superpower, they certainly need to have a reserve currency. However, Beijing knows that there is really no prospect of the RMB replacing the dollar. More importantly they are not trying to do that. They are trying to build up enough diversification to give China optionality.”

This is the strategy Bessent needs to be focused on. China is building parallel rails so they don’t need dollar permission for trade with willing partners: CIPS for messaging and settlement; mBridge for instant cross-border CBDC transactions; bilateral partnerships that deepen trade ties and create natural incentives to settle in local currencies; an interest-bearing digital yuan that could make holding RMB for trade purposes genuinely attractive. These are the actions of a regime that wants to control its own financial destiny.

Beijing is moving forward with its digital asset of choice. It’s not gold-backed crypto. It’s a CBDC running on scalable payment infrastructure, backed by bilateral agreements, and now offering yield. Yes, we should regulate the crypto industry and Godspeed to everyone in Washington. It will, in the long run, make the industry more competitive and, of course, maintain the U.S.’s enormous lead! But let’s not conflate a regulatory sandbox in Hong Kong with China’s deadly serious efforts to rewire international trade settlement — and take share from the U.S.1

Subscribe now

They are sending in Jared Kushner which means the situation in Iran is getting worse.

The WSJ wrote an excellent piece on the economic crisis in Iran, which led me to start digging into the collapse of the country's financial conditions. One thing that caught my attention was the structure of Iran’s exchange rates. I’ve been looking at currency markets for 24 years (shout-out to Dr. Toumanoff, the econometrics professor who encouraged me to study the reunification of the German mark), and frankly I have never encountered a more convoluted exchange rate system in modern economics.

Iran’s foreign exchange system has been subject to decades of sanctions, capital controls, and state intervention, so no wonder it’s fragmented. For years, multi-tiered exchange rates enabled corruption, split the economy into haves (those with access to cheap dollars) and have-nots (those without), and hopelessly complicated policy interventions because the government had to manage multiple rates instead of one.

By 2022, Iran appears to have had at least five simultaneous exchange rates. I believe this multiplicity of rates contributed directly to the January 2026 protests and currency collapse — to test this hypothesis, I reconstructed the exchange rate system using Iranian market data, international sources, and press reports.

A few framing thoughts before we get into the data:

1. Iran’s data is lousy: Iran doesn’t publish reliable exchange rate data. I’ve done my best to cobble together fragmented, contradictory, poorly-labeled information, but significant gaps — particularly 2019–2023 — limit conclusive analysis. I’ll note the data quality for each rate. Where reliable daily observations were unavailable I’ve smoothed the series (i.e. did it for the plot).

2. Multiple exchange rates breed corruption: Multiple exchange rates give political elites access to affordable hard currency, the ability to extract favors in return for that access, and the enormous temptation to exploit the arbitrage between an “official” or subsidized rate and the black market rate. An Iranian tea company, for example, obtained $3.37 billion in subsidized currency for imports but sold $1.4 billion worth of that currency on the open market at a significant profit — resulting in one of the largest embezzlement cases in the history of the Islamic Republic.

3. Sanctions create haves and have-nots: The goal of sanctions is to put enough pressure on an economy to force a change in behavior. In the process, sanctions exacerbate inequality, often enriching the elite while squeezing the middle class. Goods, services, and dollars become inaccessible to “everyday Iranians” (to borrow a much-abused political term), and eventually people take to the streets.

4. It’s the black market versus the central bank: Among the seven distinct rates I found for Iran, six were in some way managed by the Central Bank of Iran (CBI). In addition to fostering corruption, multiple exchange rates just rarely work and are usually a sign that something is broken. If your country has a black market exchange rate, you might want to consult a doctor (of economics). My editor hates these jokes. Anyway, although in some instances multiple exchange rates have been used to manage capital controls, generally they are a crisis response and a bandage for dollar shortages — they’re meant to open a release valve and buy the government time, but they never fix the underlying problem.

5. Iran’s attempt to unify the exchange rates did more harm than good: The government’s decision to unify the exchange rates (more below) meant that the government was no longer subsidizing essential imports. The elimination of the heavily subsidized import rate (again, more below) removed an implicit subsidy of roughly 75–80% on many essential goods, instantly spiking prices. This amplified the inflationary shock and ignited widespread protests. Peak protests and violent government repression happened right after this announcement (Jan 8–10).

Now behold, chaos:

Here’s what we’re looking at:

Black market rate (green line)

This is the street price at which individuals and most businesses actually transact. Government rates are somewhat irrelevant for daily life because they’re artificially low, heavily restricted, and don’t reflect true dollar scarcity. The black market rate diverging from official rates is a fundamental vulnerability. Every percentage point of divergence creates “arbitrage opportunities” (e.g. corruption).

Iran’s currency crisis unfolded in stages. The black market rate held steady at 37,000 rials per dollar through 2017, but President Trump’s exit from the nuclear deal (JCPOA) in 2018 sent the rate soaring to 190,000. After ranging between 125,000–300,000 during COVID, and climbing to about 600,000 by 2024, the rial crossed 1 million for the first time in March 2025. Then the wheels came off: in the past seven months, the rate has exploded from 800,000 to over 1,600,000 rials per dollar, halving the currency’s value.

Data quality: Daily from Bonbast.com, a widely-used parallel market aggregator and the most consistent public source available. High confidence for directional trends; medium confidence for precise daily figures.

Official rate (aqua line) and CBI Reference/daily quoted rate (pink line)

Iran had a managed float (market-driven rates with periodic government intervention) for many years that stayed pretty close to the black market rate. In early 2018, facing currency panic after the JCPOA collapsed, the Iranian government tried to enforce a pegged rate of 42,000 rials per dollar. They made other rates illegal! Which of course failed, forcing the CBI to introduce additional subsidized rates. Without massive dollar reserves, which Iran didn’t have, you can’t defend a peg at 42,000 when the black market is 600 percent higher.

Parliament finally voted to phase out their pegged rate in 2022. The CBI didn’t formally abandon it until mid-2024. This official rate was then replaced with the CBI reference rate which the CBI called a “weighted average” rate, starting around 370,000 and gradually climbing to over 600,000.

Data quality: Monthly from IMF/World Bank (high confidence on the numbers themselves). The timing of the phase-out is less clear. For the CBI reference rate, we used data from CEIC and the CBI website. High confidence on the numbers; low confidence on what the “weighted average” actually includes as I did not find the Central Bank of Iran’s methodology all that transparent.

Subsidized import rate (orange line)

When the Iranian Parliament killed the 42,000 peg, the government still wanted to subsidize essential imports (food, medicine, agricultural inputs). So they created a special rate starting at 285,000 rials in early 2022. This import rate stayed frozen even as other rates climbed, which proved to be a prohibitively expensive subsidy for the government over time.

This rate was eliminated last month (January 1, 2026), however there are conflicting press reports indicating that it would still be available for wheat and medicine.

Data quality: Collected from Iranian press. Medium-high confidence on the rate; lower confidence on actual enforcement and availability. I could not find reliable sourcing to show how and if Iranian importers got access to this rate.

NIMA Rate (blue line)

The Iranian government launched NIMA (the Integrated Foreign Exchange Market System) in April 2018. NIMA was a foreign exchange platform that required Iranian exporters to repatriate and sell a percentage of their foreign currency earnings to the Central Bank, which then sold the hard currency to importers of essential goods at a subsidized rate well below the black market rate.

NIMA began its phase-out in December 2024 and was eliminated in January 2025.

Data quality: I was only able to find some of this data on TGJU (an Iranian financial information platform) and even then the data starts November 2018 — missing NIMA’s critical first seven months. Massive gaps from 2019-2023. After February 2022, it’s unclear if “NIMA” data is actually NIMA, ETS, or some unholy mixture of both. I have low confidence in these numbers because there are too many gaps for meaningful analysis. I’m including it because it’s all that exists, but any 2019-2023 analysis is speculative.

Electronic Trading System Rate (purple line)

Created in February 2022, ETS was intended to provide a formal platform for cash currency exchanges and was theoretically more market-driven than NIMA, with the CBI announcing that exchange rates would be “determined based solely on market supply and demand.” After the government axed NIMA in late 2024, ETS became the primary legal commercial channel for non-subsidized access to hard currency.

Data quality: Low-to-medium. ETS and NIMA overlapped for 34 months. No source differentiates them during this period — TGJU’s data could be NIMA, ETS, or some blend. Not sure what the data represents during overlap, more reliable post-December 2024 but still intermittent.

Unified Rate (yellow blip)

If you look closely, there is a yellow blip at the top right. In early January, the Iranian government tried to stem the eruption in the black market rate with a unified official rate at 1,310,000 rials — only 4.6% below the black market (~1.37M). In 2018, the CBI had been overly optimistic setting the official rate at 42,000. This time around they tried a dose of realism, but still got their face ripped off by the black market rate. Within three weeks, the black market premium widened from 4.6% to 22% (1.59–1.61M).

So, it sure feels like this attempt has already failed.

Data quality: Confirmed by Al-Akhbar and Iranian press. Low-to-medium confidence on announcement. I found multiple sources regarding the decision to eliminate the subsidized rate and move to a single rate, but I could not find a source to corroborate the 1.31 million rials from the Al-Akhbar article; premium calculation based on Bonbast data.1

Subscribe now

A strange fact about the euro is that a euro in a German bank isn’t quite the same as a euro in an Italian bank — despite both being Eurozone countries. This is essentially a failure of the European economic bloc to fully integrate, but, after the Battle for Greenland, the Europeans appear to be rethinking their position.

Let us cast our gaze to Davos, where Canadian Prime Minister Mark Carney’s speech earned its place in history as the most articulate global recognition that the world has ruptured from the post-Bretton Woods rules-based international order and become… something else. Carney had previously called it a “new world order.” We are obviously not going to call it that. German Chancellor Merz called it “an era of great power politics.” One can imagine an international relations textbook dubbing it the age of “principled pragmatic polarity.” The White House might simply call it “THE THUNDERDOME.” All have their merits.

Carney’s speech called for “middle powers” to apply the same standards to allies and rivals, build new institutions rather than awaiting the old order’s revival, and reduce vulnerability to coercion through strong domestic economies and diversified international ties. Personally I read it as a call for fewer dependencies.

I wouldn’t hold my breath that our allies are sitting around waiting for the U.S. to wind the clock back to 2015. The Battle for Greenland seems to temporarily be on ice (ha!), but the Europeans are vocal about reevaluating their relationships, dependencies, and vulnerabilities. Or, as Christine Lagarde, President of the European Central Bank, put it, “[we’re] going to do a big SWOT analysis.”

And with that analysis, we should expect the Europeans to try to assert a greater international role for the euro.

Second best

Upon its launch in 1999, the euro was hailed as the first major rival to the dollar since the greenback replaced the sterling as the world’s dominant currency after WWII. A former boss of mine called the euro “Europe’s answer to war on the continent.” And while it has helped prevent war between members, both politics and the lack of a fiscal and financial union have held the currency back from leveraging the heft of the European bloc to become the top global currency. Thus the euro sits in second place and by quite a large margin.

Necessity is the mother of invention

Alexander Hamilton said it best. “A national debt, if it is not excessive, will be to us a national blessing; it will be a powerful cement of our union.” The Eurozone never federalized its debts; the Germans looked at the Greeks and said, nein danke. All the European national governments still own their respective debts and budgets, despite sharing a single currency.

But despite reluctance to loosen grips over their national accounts, one thing has motivated Europe: crisis. Crisis is the one thing that can push the Europeans out of their comfort zone and toward greater integration.

The Europeans are well-motivated by existential threats.

Eurozone Debt Crisis (2009–2012)

This crisis exposed deep fractures in the Eurozone. Mario Draghi, then President of the European Central Bank, promised to do “whatever it takes” to preserve the euro. Integration measures followed, notably the Fiscal Compact, the European Stability Mechanism, and talks (that eventually stalled) on debt mutualization and Eurobonds.

The debt crisis also gave birth to the Banking Union (2014) and the Capital Markets Union (2015), which helped centralize banking supervision, break the loop between banking risk and sovereign risk, and make Europe’s financial system less fragmented and more resilient.

Rise of U.S. Unilateralism (2016–2019)

Frustrated by Trump’s unilateralism — especially the U.S.’s 2018 withdrawal from the Iran deal (JCPOA) and reimposition of sanctions on Iran — President of the European Commission Jean-Claude Juncker declared “the hour of European sovereignty” in his State of the Union address, calling for the euro to become the instrument of a more sovereign Europe. This led to an announcement from the European Union titled, “Towards a stronger international role of the euro,” and the 2019 launch of INSTEX — a kind of clearing house — by France, Germany, and the UK to enable non-dollar trade with Iran. This was a notable defiance of U.S. financial hegemony in the modern era. (INSTEX was dissolved in 2023.)

COVID-19 Pandemic (2020)

The pandemic came as a severe shock, exposing eurozone weaknesses and accelerating demands for fiscal solidarity and digital payments. In 2020, EU leaders agreed on the €750 billion NextGenerationEU fund with joint debt issuance — the first major step toward debt mutualization and fiscal union. Lockdowns also drove a shift to digital payments, prompting the ECB in October 2020 to formally investigate creating a digital euro to bolster monetary sovereignty and reduce reliance on foreign digital systems.

Signposts that the EU may actually be serious about a global euro

Davos is over, but the Battle for Greenland will leave a sour taste in Europe’s mouth. Disagreements over European integration have hamstrung the euro but fears of territorial loss and economic coercion can make neighbors become friends real fast.

The euro is unlikely to replace the dollar anytime soon — the European Union combined is still only the second-largest economy in the world by nominal GDP and not all countries in the bloc use the euro. However, we’re watching for steps the Europeans could take to materially chip away at the USD’s position.

Finalizing European deposit insurance (EDIS): Insured deposits at European banks are only guaranteed by the country in which the deposit is held. This is one of the reasons why a euro in an Italian bank carries different risks than a euro in a German bank — building a Eurozone-wide deposit scheme would solve this by making deposits truly fungible. Though this third pillar of the Banking Union remains stalled, post-Davos calls for unity could trigger a plenary vote on recommendations like one in the 2024 EU Committee report, which proposed exploring loans to national deposit guarantee funds as a precursor to full deposit insurance.

Pursuit of a Common Asset: Eurozone bond markets just aren’t deep enough to provide a serious alternative to the deep and liquid capital markets of the United States. The numbers prove it: the entire Eurozone has approximately $14 trillion in sovereign debt, compared to the U.S. with $31 trillion. European defense spending, which rose 11% in 2025, could increase the supply of national bonds as governments look to fund budget increases, but that doesn’t fix the lack of a mutual safe asset.

The NextGenerationEU bonds were a historic step toward debt mutualization — some called it Europe’s “Hamilton moment.” The last distribution from those bonds is being made this year, and any further issuance would be worth watching. If the Eurozone is serious about improving the role of the euro, it has no choice but to deepen the pool of euro-denominated safe assets through a mutualization framework.

Accelerating the digital euro: The ECB recently finished the prep phase for a digital euro and has moved to the technical build-out. If legislation passes in 2026, pilots could start mid-2027, and be ready for issuance by 2029. A digital euro would enhance monetary sovereignty and reduce reliance on foreign payment systems, making it clear that while the U.S. is promoting privately-issued stablecoins as a cross-border solution, the Eurozone will not outsource monetary infrastructure to a private company or the United States.

A digital euro would provide a sovereign digital settlement asset that includes many of the functional features of a stablecoin without the private credit risk.

Providing incentives to settle trades in euros: The EU is the top trade partner for 72 countries, giving the Eurozone some under-appreciated negotiating heft. Global infrastructure is designed for dollar settlement, but the Eurozone could provide incentives for settling transactions in euros instead. For example, the EU’s new carbon border tax (CBAM) forces importers to pay for emissions on carbon-intensive goods (steel, cement). The bloc could offer favorable terms or reduced costs if the entire transaction for carbon-heavy goods is settled in euros. We should look out for the introduction of more incentives — or an improvement in euro liquidity in trade finance — to accelerate euro-denominated trade.

Pricing commodities in euros: In 2018, then European Commission President Jean-Claude Juncker noted that it seemed absurd that the EU imports its energy in dollars. The EU might try to challenge dollar hegemony in energy markets by increasing liquidity on European exchanges for commodity derivatives — specifically through longer trading hours, new euro-denominated derivatives (e.g. liquid hydrogen or liquid natural gas benchmarks), and CBAM-linked incentives (see above).

Expanding euro swap lines: The ECB maintains standing bilateral swap lines with major central banks: the Federal Reserve, Bank of Canada, Bank of Japan, Swiss National Bank, Bank of England, and the People’s Bank of China. The ECB also maintains other temporary or precautionary liquidity lines with various non-euro area central banks for crisis support. Strategically expanding swap lines with key trading partners would also support use of the euro as a vehicle currency.

Until a euro in an Italian bank is the same as a euro in a German bank, Europe’s favored currency will always be a distant second. The U.S. has long benefitted from the slow economic integration of the European Union, but under the thunderdome, we may not be able to rely on intra-European squabbling for much longer.1

Subscribe now

Back in November, Fed Governor Stephen Miran made a speech at the Harvard Club of New York on what he called a “global stablecoin glut.” While most of the speech was about downward pressure on rates and the zero lower bound, he made a passing comment about “incremental dollarization [from stablecoins] may reduce the benefits of floating exchange rates.”

Quick refresher:

When an economy weakens, textbook macro theory holds that three things typically happen in sequence:

• Currency depreciation — That country’s currency loses value relative to other currencies, making its exports cheaper for foreign buyers.

• Rising export demand — Because those goods are now cheaper, importers in other countries buy more of them.

• Economic cushion — Higher exports mean more sales for domestic companies, which protects jobs and provides a boost that softens the downturn.

This is what we mean when we say that the depreciation provides some shock-absorbing effect and helps cushion an economic decline. When a country dollarizes or pegs its currency to another currency, there can be no depreciation and therefore no shock-absorbing effect.

I found this comment a bit casual given that Miran seems to be ignoring the other risks that come with semi-dollarization. This got me thinking about how Ecuador’s experience with a dual-currency system in the 1990s can help us think through the implications of semi-dollarization that might follow broad adoption of dollar-pegged stablecoins.

Ecuador’s cautionary tale

Ecuador’s experiment with semi-dollarization is a caveat emptor for countries looking to “stable-ize” (get it? like dollarize, but with stablecoins?) with USDT, USDC, etc.

While Ecuador battled hyperinflation, FX volatility, and banking failures in the 1980s and ‘90s, Ecuadorian citizens increasingly used U.S. dollars for two reasons:

• Stable unit of account: The social contract around the sucre, Ecuador’s currency, was broken: volatility and chronic depreciation of the sucre eroded domestic purchasing power, so consumers and firms sought a stable unit of account for storing wealth and making transactions. USD was the obvious complement to the sucre for savings and pricing.

• Growing access to dollars: Globalization (trade) brought more USD revenue into Ecuador, which also fueled a natural dollarization process.

Over the ‘90s, Ecuador’s economy became semi-dollarized — slowly at first, but pervasively towards the end of the decade. Dollar-denominated loans were 1.9% in 1989 and over 60% by 1998. The country more or less endured until 1998, when El Niño wrecked infrastructure, oil prices collapsed (not great when oil is 40% of national revenue), and contagion from the Asian Financial Crisis and the Russian and Brazilian defaults battered the economy.

The lingering effects of an economic crisis in the mid-’90s and institutional weakness created a tinderbox. The exchange-rate depreciation and shocks of 1998 were the match. Semi-dollarization was the gasoline. Chaos ensued:

• Borrowers got squeezed. Even though most Ecuadorians earned their wages in sucres, they borrowed in dollars because USD was accessible and more stable than the sucre. However, when the exchange rate depreciated, the sucre cost of paying back the dollar loans shot up. When borrowers couldn’t pay back their dollar loans, non-performing loans piled up on bank balance sheets and reduced bank cash inflows. Worried depositors began withdrawing their deposits, which only intensified systemic liquidity issues.

• The money supply ballooned: Semi-dollarization meant that the money supply in Ecuador had both a dollar and sucre component. When the sucre depreciated sharply, the dollar supply became worth much more in sucres — automatically expanding monetary supply in sucre terms, even though the Central Bank of Ecuador hadn’t lifted a finger. This only made inflation worse.

• The Central Bank lost monetary autonomy: The semi-dollarization of the economy rendered the Central Bank of Ecuador’s crisis-fighting tools ineffective. The country needed dollars, but the central bank could only print sucres. And raising rates enough to defend the currency would have only hurt the economy and pushed even more deposits into dollars, in expectation of more inflation.

Ecuador had little choice but to abandon the sucre in 2000 and fully dollarize. Semi-dollarization had made a mess: the population suffered all the pain of a collapsing local currency, and the government lacked the tools to control the collapse.

Subscribe now

Semi-stable-ization vs. semi-dollarization

Ecuador’s experience is a warning for what happens when a monetary system becomes partially anchored to an external store of value while still relying on a domestic currency and local financial institutions to intermediate credit, liquidity, and payments.

Semi-dollarization didn’t cause the meltdown, but it certainly contributed. In a country that semi-stable-izes, the experience will likely be worse for several reasons:

There is no lender of last resort for privately issued currencies. Tether and Circle aren’t designed to provide emergency lending — they have no mandate to supply unlimited liquidity. Yes, Tether has minted billions since the crypto crash in October 2025, suggesting they can print quickly. But the lack of established emergency facilities, the cost of massive safe-asset purchases, and pure discretion could all limit a stablecoin issuer’s willingness or ability to backstop a crisis. And if the issuer can’t or won’t help, which multilateral institutions would be willing or able to provide stablecoin liquidity? In 1999, Ecuador got an IMF package to provide dollar liquidity. What institution backstops a stablecoin shortage?

Central banks may have no way to intervene. In a stable-ization event, will central banks even have stablecoin reserves to sell in defense of their local currencies? I would imagine that legislation or central bank regulation would have to be amended to allow reserves denominated in privately issued money. In practice, this probably means that commercial and retail sectors will adopt stablecoins faster than a central bank can adjust its reserve accumulation rules — leaving central banks without the stablecoins they’d need to intervene.

Nonbank financial institutions (NBFI) lack a strong crisis-support system. A couple of issues here. Consider a scenario where 40–60% of a country’s deposits shift to stablecoins held in non-bank wallets. In most countries, those deposits are not eligible for deposit insurance, which would lead to enormous loss of wealth in a crisis, similar to the Celsius blow up but at a much larger scale. Also, NBFIs don’t have access to central bank emergency lending facilities like the discount window, TARP, or SRF. If fintechs or their customers face currency mismatches on their balance sheets, there’s no backstop to prevent runs or keep intermediaries solvent. And fintechs intermediating stablecoins aren’t subject to the same capital requirements as banks, which could be a problem in a crisis.

Full stable-ization is not an option: Ecuador ended its crisis by fully adopting the dollar and abandoning the sucre. This is likely impossible with a stablecoin. The dollar is a sovereign currency issued by the Federal Reserve, which has an implicit mandate to maintain stability and can supply unlimited liquidity if needed. Stablecoins like USDT or USDC are privately issued with supply tied to reserves — there is no central bank to create infinite units in a crisis. Stablecoin issuers also have no obligation or capacity to rescue a foreign adopter’s financial system. Declaring a private stablecoin as sole legal tender would lack credibility without a backstop, likely leading to failed adoption (see: Bitcoin experiments) or rapid reversion amid runs.

So, what now?

History doesn’t repeat, but it rhymes. We know that semi-dollarization can cause real problems in a crisis and we have good reason to believe semi-stable-ization would be even worse. We need to think ahead. There is a probable future in which an emerging market semi-stable-izes. Instead of scrambling to install a safety net in the middle of a crisis, the U.S. government should bring the major players together — stablecoin issuers, G7 central bank heads, multilateral financial institutions, and GSIBs — to at least start talking about what such a safety net might look like.

In the apocryphal words of that fiat fanatic, Benjamin Franklin, “By failing to prepare, you are preparing to fail.”

Subscribe now

Sources:

Andrea Bonilla-Bolaños and Diego Villacreses, “Full Dollarization versus Monetary Union: The Case of Ecuador,” CEPAL Review, no. 140 (August 2023).

International Monetary Fund, Monetary Policy in Dollarized Economies, IMF Occasional Paper no. 171 (Washington, DC: IMF, 1999).

Paul Beckerman, “Dollarization and Semi-Dollarization in Ecuador,” World Bank Policy Research Working Paper no. 2643 (Washington, DC: World Bank, July 2001).

Luis I. Jácome H., “The Late 1990s Financial Crisis in Ecuador: Institutional Weaknesses, Fiscal Rigidities, and Financial Dollarization at Work,” IMF Working Paper (Washington, DC: IMF, January 2004).

Bailey Decker, “Ecuador: National Bank Holiday, 1999,” Journal of Financial Crises 7, no. 2 (2025): 108–142.1

Venezuela coverage has been wall-to-wall and nobody knows what’s going to happen next. An excellent habitat for talking heads. Perhaps the oil companies will go in, we’ll pay for the oil with dollars, custodied by the U.S. Treasury, which can only be used to buy… washing machines made in Ohio?

On Friday, in a meeting with oil executives, the CEO of EXXON called Venezuela “uninvestable.” The Halliburton CEO admitted that they left in 2019 due to sanctions. Before any American companies return to Venezuela, they’ll first demand clarity and guarantees on the lifting of sanctions. This is only rational.

Amid the chaos, I always find it best to go back to stats and fundamentals. Instead of trying to gauge what the U.S. will do, let’s take a look at the structural barriers to doing anything: the sanctions on Venezuela and what might happen to them.

An economy in distress

The Venezuelan economy has been in distress for quite some time, even before the most restrictive sanctions were imposed. Famously, in 2017 there were reports that citizens were breaking into the Maracaibo zoo to eat the animals because of food shortages. Eating stolen zoo animals should be a legitimate crisis indicator. At its peak, average annual inflation hit over 65,000 percent in 2018, according to the IMF. By the time OFAC designated PDVSA (the state-owned oil company) in 2019, Venezuela’s GDP had already fallen from a peak of $393B in 2010 to $102B at the end of 2018, according to World Bank data.

The 414

Looking at the Office of Foreign Assets Control’s (OFAC) SDN list, 414 names are currently sanctioned. That’s a combination of aircraft, entities (companies, institutions, government agencies), individuals, and ships.

The escalation ladder

In order to impose sanctions, OFAC relies on legal authorities from either executive orders or public laws1. After Nicolás Maduro came into power in 2013 and cracked down on democratic rights, Congress passed the Venezuela Defense of Human Rights and Civil Society Act in December of 2014. Seven executive orders against Venezuela followed.

The first designations happened in 2015 under Executive Order 13692 targeting violators of human rights and democracy. Prior to 2015, there were no financial sanctions on Venezuela. The executive orders have grown in reach and severity as the situation in Venezuela has worsened. Here is a quick(ish) rundown:

Can I please see this in a chart?

I am so happy you asked. This chart summarizes which EOs were used the most. In some cases OFAC will use multiple authorities (under multiple sanctions programs) to designate an entity. This makes it significantly more difficult for them to be removed from the sanctions list. Most vessel designations are under EO 13850 (oil sector), but recent seizures (Dec 2025–Jan 2026) often use hybrid counter-narcotics/terrorism authorities for international waters enforcement.

Licenses as safety valves

Sanctions are enormously costly for the target country. Nicolas Mulder’s book Economic Weapon notes that the Allied blockade in WWI contributed to 300,000–400,000 people dying of starvation in Central Europe. OFAC tries to avoid these sorts of tolls against civilians by conducting impact assessments to figure out what licenses (general or specific exemptions) are needed to mitigate the impact of sanctions. Russia’s sanctions program has the most active general licenses. Venezuela is in second with 27 active general licenses (GLs) and 16 expired. A general license (GL) essentially permits certain types of activity to anyone who qualifies. Depending on the nature of the request, OFAC, (usually) in consultation with the Department of State, will also issue specific licenses to applicants, but those aren’t publicly disclosed, pursuant to the Trade Secrets Act.

Licenses can be confusing to navigate (which leads to lots of over-compliance and refusals to do business even in non-designated sectors) and the Venezuela programs specifically have seen short windows of permitted activity followed by fast removals. For example, in October of 2023, General License 44 permitted oil and gas operations for 6 months. Which is absurd — what company would invest in decrepit oil infrastructure for only 6 months at great cost? So it was extended for another month and never renewed after May 2024. Not tenable.

Chevron is probably the best-known example of a general license. They got a GL to resume limited oil production in November 2022. In early 2025, they were ordered to wind down operations within two months. Then in late March 2025, Chevron got another license which told them they could extend the wind-down until the end of May 2025 (an extra two and a half months). Lots of back and forth. This all makes it understandably difficult for U.S. companies to commit to serious capital investments.

Outside of the oil sector, licenses in Venezuela tend to fall in the following categories.

A path to securing a place for the dollar

In Venezuela, the United States has gone from enforcing sanctions through banks to enforcing sanctions through tanks (well, ships, but that doesn’t rhyme). While this satisfies the administration’s aims on sanctions adherence, it won’t provide Venezuela the serious economic relief it needs to rebuild and eventually allow the U.S. to take the country out of, how should I say this, conservatorship. While sanctions weren’t the sole cause of Venezuela’s economic collapse, they have become increasingly severe and certainly a major contributor to economic distress. The country cannot move forward without sanctions relief. Here are some thoughts:

1. Lift certain sanctions: The U.S. has to balance economic leverage on the regime with access to goods and services. The government may want to consider a more targeted strategy that lifts sanctions on sovereign debt or affiliates of PDVSA. For example, Monómeros is a Colombian fertilizer company whose majority owner is Pequiven, Venezuela’s state-owned petrochemical company. Pequiven itself is a subsidiary of PDVSA, Venezuela’s national oil company. Monómeros had a specific license to sell its products which was not renewed. In my opinion, commercial activity related to agricultural production should be allowed — we should be issuing licenses, with long time horizons, to permit this sort of activity. The U.S. government could also think about providing comfort letters to vetted foreign partners of the U.S. in certain sectors to share the burden of rebuilding the economy.

2. Communicate what is open: Confusion over licenses makes American companies hesitant to invest in Venezuela. The U.S. needs to put out a clear and transparent guide for how to reenter the country. This way, while U.S. energy companies rebuild the carbon infrastructure, other U.S. companies can help rebuild domestic infrastructure like roads, schools, and hospitals. The economy has been a mess for over two decades. Ambiguity about sanctions will keep U.S. commercial interest focused on oil — which alone can’t give Venezuela the help it needs.

3. Provide tools to access USD: Venezuela has probably patched together a financial system through black-market cash from oil sales, limited offshore banking, and a shift to crypto. The U.S. needs to provide the Venezuelan banking sector with real access to USD, and OFAC should issue targeted general or specific licenses for U.S. correspondent relationships with non-sanctioned private Venezuelan banks. The U.S. government could also turn to existing general licenses as templates for limited debt/bond relief tied to reforms.

4. Give U.S. companies guarantees on timelines: U.S. oil companies have already come out and said that they need strong legal and financial guarantees to re-enter Venezuela. These companies have the technical capabilities and resources to rebuild infrastructure in Venezuela, but they are also public corporations who must answer to shareholders — the U.S. government needs to promise a minimum 2-year timeline for an initial phase of investment, with potential guarantee of financial compensation if the policy changes.

5. Mandate goods be denominated in USD: Nearly 100 percent of export invoicing in the Americas is done in U.S. dollars, but we can assume that Venezuela’s share has deteriorated because of lack of access to USD. We should give the financial sector access to the dollar, BUT mandate that sanctions relief is attached to their use of the dollar in export invoicing. If Venezuela truly has the world’s largest reserves of crude oil, this is a rare opportunity to reinforce dollar supremacy in commodity pricing by mandating that the export of that oil is done in USD.

I was recently struck by how quickly and comprehensively we lifted sanctions on the (new) Syrian government earlier last year. The head of the Syrian Central Bank hailed the repeal as a “miracle.” The Venezuelan government appears ready to cooperate with us. They should have an opportunity to manifest the same economic miracle.2

Well, it appears that the Trump administration is serious about executing its National Security Strategy.

So… I went back and looked at every National Security Strategy (NSS) since the report was mandated in 1986 by the Goldwater-Nichols Department of Defense Reorganization Act (people say I’m fun at dinner parties). The NSS is a regular report the President sends to Congress. It basically lays out the big picture: what the U.S. is worried about, what our top priorities are, and the administration’s game plan for keeping the country safe and prosperous.

Our research is focused on the dollar, so part of this audit was to see how this administration is speaking differently about the currency’s role vs. previous administrations.

I assumed there would be mentions throughout the years of how the U.S. dollar’s role as the world’s reserve currency is one of our main instruments of foreign policy and a national priority to maintain — especially after 9/11, when Treasury leveraged the financial system to counter terrorism and isolate the axis of evil. I found references to the importance of a healthy American economy (references which slowly morphed into the importance of a strong world economy after the Asian Financial Crisis in 1997). And I found talk about the need for open financial markets to ensure prosperity. I certainly found a lot of palaver on free trade and building up international financial institutions. There was even mention of the importance of sanctions as a tool of national security.

But as for any direct acknowledgment of the dollar’s reserve status as a core national security interest… nothing.

Of course, U.S. officials have highlighted the dollar’s reserve status over the years in speeches, op-eds, and testimonies. Yet the dollar’s centrality to American power projection was never codified in the NSS itself.

Until 2025.

What Are America’s Available Means to Get What We Want?

• The world’s leading financial system and capital markets, including the dollar’s global reserve currency status;

Say what you will about the merits or demerits of the self-titled “Trump Corollary to the Monroe Doctrine” and the rest of the document, but the fact that this was the first time the NSS has explicitly tied the dollar to national security is notable and echoes longstanding bipartisan thinking.

It is about time.

The dollar belongs in the NSS. Again, for years, policymakers across administrations have treated the dollar’s role as a strategic asset in practice and generally done what is necessary to maintain its status.

Think about the fundamentals of a reserve currency: deep and liquid financial markets, economic heft, robust institutional credibility, military and diplomatic relationships. Over the past 25 years, despite recurring concerns that the renminbi or euro might eventually surpass the dollar, the United States has largely maintained these core pillars. However, on two elements central to supporting network effects — access and infrastructure — we have moved slowly and fallen behind. And it shows.

• U.S. regulations have made it prohibitively expensive (and fraught on the compliance side) to distribute our payment systems in foreign markets, leading to American banks’ retrenchment from emerging markets. From 2011–2022, the number of USD correspondent banking relationships fell between 30 percent and 76 percent across regions — particularly sharply in areas like the Pacific Islands — according to a BIS study conducted with SWIFT. Though there has been a trend in de-risking across different currencies, USD correspondents have seen the deepest reduction.

• Stablecoins have taken center stage as the leading candidate for next-gen cross-border payments, the largest being managed by a private issuer domiciled and operating outside the U.S., using American safe-haven assets to back its currency.

• While China piloted a retail central bank digital currency (CBDC) and led mBridge — the most advanced cross-border wholesale CBDC — the U.S. spent years dithering about whether to participate.

[Obama voice] Let me be clear. There is no single challenger to the U.S. dollar right now. The threat is from the rising use of a basket of currencies, which chip away at the dollar’s role in aggregate. This will not happen tomorrow, and that is the problem. The glacial nature of this issue has allowed our policymakers to ignore threats to the dollar. We assume infinite dominance in financial markets and are failing to take active measures to ensure the dollar’s global role. We are suffering from the hubris of permanence.

So what can be done?

I don’t know who wrote the NSS, but someone in the administration seems ready to take action. Either that or they are just paying lip service, which would make me a very, very sad economist :( If the administration is serious, they can start with a few concrete policy steps to shore up the dollar:

1. Amend the GENIUS Act: The GENIUS Act is a step in the right direction. However, allowing foreign private stablecoin issuers to benefit from the stability of our financial system, without equivalent promises to safeguard that financial system, is shortsighted. An amendment should demand that if a foreign issuer holds U.S. treasuries in its reserves and operates outside the U.S. market, it must comply with U.S. AML/CTF and sanction requirements. This is already par for the course for foreign banks leveraging USD correspondent relationships. Fair access to American markets should come with fair responsibility.

2. Burden sharing with U.S. financial institutions: Heavy fines in the 2010s spooked banks and led to a wave of de-risking, which significantly reduced dollar access globally and forced countries to turn to alternative settlement mechanisms. For many banks, simple compliance risk/reward calculations led to the abandonment of some jurisdictions, such as the Pacific Island Countries, many of which are strategically significant to national security. The government should partner with American banks to support national policy aims by returning to strategic jurisdictions. U.S. banks propose a plan. The USG approves it. Both parties monitor risk: if deemed too risky, the U.S. firm exits without penalty.

3. Understand our adversaries’ alternatives: U.S. economic diplomats overseas should actively engage foreign commercial partners — banks, fintechs, and central banks — to understand if and why they’re adopting alternatives like China’s Cross-Border Interbank Payment System. This needs to be a systematic information-gathering effort. By feeding these insights back to Treasury, Commerce, and the Fed, the government can develop countermeasures, like targeted incentives for using dollar-based infrastructure. It is worth noting that the NSS specifically states that U.S. embassies should be promoting American businesses, and there is a bill sitting in the House that creates an Office of Strategic Currency Diplomacy within the State Department, which would be an ideal steward for a task like this.

4. Continue to lead on standards for distributed ledger tech (DLT) platforms: If the U.S. isn’t going to pursue a CBDC, we need to ensure that our preferred method for cross-border payments can still integrate with CBDC systems. One way to do this is to lead on standards. The International Standards Organization’s (ISO) committee for blockchain and distributed ledger has 12 established standards published and 22 under development, including an interoperability framework. ISO doesn’t disclose who contributes to which standards, but given that China is a participating member, they have likely nominated experts to work on this standard to ensure their DLT-based platforms like mBridge and e-CNY are connected.

The challenge now is to translate rhetoric into actions that reinforce the dollar’s advantages and address emerging threats. Equally challenging will be promoting the dollar against the backdrop of twin deficits, attacks on the Fed, and an unpredictable tariff regime that could make foreign users of the dollar question our institutional credibility.

As proven by last weekend’s actions in Venezuela, the U.S. is no longer hiding its hand. The 2025 NSS puts the dollar where many have long believed it belongs: at the heart of U.S. national security planning. That sends a signal to the world, yes, but also to domestic policymakers that claiming the dollar as a national security asset will require treating it like one, including maintenance, fresh paint, and judicious use.1

Silicon Valley and DC have come around to the fact that trade can be a more effective weapon than boots on the ground. We now, rightly, are debating the controls around chips, fiber optic lines, and the merits of heavy crude. However, this dialogue overlooks the plumbing that not only underlies trade but also enforces our will: the dollar. This is an existential problem. We can argue about controls, but without the monetary infrastructure to enforce them, we’re just screaming into the wind.

I spend a lot of time talking to businesses and financial institutions in complex regions. Lately I’ve been traveling in the border regions between the East and West, because they’re often the first to adopt new financial technologies or workarounds by necessity (Western de-risking, hyperinflation, rumors of war). You can learn more in an hour with a hawala dealer in Kinshasa or Bishkek than a week with some banker in London or crypto lobbyist in DC.

Most talking heads ignore these countries because they aren’t major economies or even U.S. allies, but their resources and locations will make them pivotal in a future conflict. Who they’d side with, and where their resources will flow, in any conflict very much depends on which country they’re more integrated with economically. Our adversaries realize this. They’re flooding these regions with state-sponsored financial weapons. You can’t visit some countries in Central Asia, Africa, or even south of our border without getting hit in the face with Chinese financial infrastructure and services designed to not only tightly couple these financial systems to China, but also blunt the use of America’s greatest weapon — the dollar.

Controlling the world’s monetary and trade infrastructure is a primary source of American power projection: if the U.S. can cut off dollar access to stop a bad guy from invading their neighbor or building a nuke, that saves us from having to put boots on the ground or weapons in the air. That’s good for America, good for roughly 80 years of global stability, and something we’re at risk of losing. Rivals like China are building payment and settlement systems to circumvent our financial system entirely, and supporting offshore synthetic dollars that weaken our control over our own currency.

The United States is sleepwalking our way through a financial cold war. With Silicon Valley’s newfound interest in national security, there’s a lot of energy going into conventional defense, space, and artificial intelligence fronts. That’s good and long overdue. But let’s not forget that we won the Cold War largely as an economic war through economic means.

I run a regulated tech company. I interact with the government a lot, so it’s very apparent to me how our financial system draws legitimacy from and reinforces America as a sovereign nation. However, this connection has historically been implicit. It needs to be made explicit.

Today we’re launching Hegemoney to publish analysis on how the U.S. wields the dollar, and what we can do to dominate financially through new technologies and better policy.

Hegemoney is named after hegemonic stability theory; in the words of Charles Kindleberger:

“For the world economy to be stabilized, there has to be a stabilizer, one stabilizer.”

Jess Hoversen, the Chief Economist on our team, will be the main voice for this project. She joins us after 13 years as an economist at the CIA, Department of State, and Department of the Treasury, focusing on national security. I might drop in from time to time. But mostly we’re giving her the space to publish on whatever she finds most important.

If you’re interested in working with us on something, get in touch at hegemoney@column.com.