Macro Musings with David Beckworth · Monday, August 3, 2026
Barry Eichengreen outlines the historical economic and political prerequisites for a currency to achieve international dominance. Economically, this includes a country's significant trade, investment, and stable financial markets. Politically, it requires internal stability like separation of powers and control of corruption, as well as external geopolitical alliances where partners trust the issuing nation.
“So that history elucidates the economic and financial prerequisites for international currency status that I think will be familiar to economists. That they tend to be the currencies of countries with considerable economic, commercial, financial prowess, their big exporters and importers, big foreign investors and so forth, that possess stable currencies and liquid financial markets.”
“But I emphasize also that there are important political prerequisites for international currency status. Internal and external.”
“Internally, they tend to be the currencies of countries with a separation of powers, rule of law, control of corruption.”
“Externally, they tend to be the currencies of countries that have well-established geopolitical alliances where their alliance partners regard the issuing country as a reliable steward of their foreign reserves, where the alliance partners are more than willing to hold and use that currency as a show of good faith in their geopolitical partners.”