My Review of Barry Eichnegreen's "Money Beyond Borders"

 All Glory is Fleeting

U.C. Berkely economics professor Barry Eichengreen opens his history of global currencies with the “Nixon Shock” of 1971 which broke the dollar’s link to gold. (See my previous review of this event at Shulmaven: My Amazon Review of Jeffrey Garten's "Three Days at Camp David..........." ) I also reviewed a much lighter version of what Eichengreen discusses here earlier this year. ( See: https://shulmaven.blogspot.com/2026/01/my-review-of-david-mcwilliams-history.html )

 

Professor Eichengreen, the author of “Golden Fetters,” on the workings of the interwar gold standard, is a serious scholar of international monetary affairs. Here he is writing against the backdrop of a weakening U.S. dollar where the role of the U.S. dollar’s pivotal role in in the global monetary system is being called into question. This is far from the first time a preeminent international currency has been called into question. Eichengreen goes back in time to Athenian silver coins, the Roman denarius, the Florentine florin, the Dutch guilder, the Spanish “pieces of eight,” and the British pound sterling. All had their day in the sun and then faded away.

 

Although there were many idiosyncratic reasons for their demise, there were several common factors involved. The currencies lost their panache because of either internal or external political weakness and the willingness to engage in a debasement policy. Furthermore, as we moved closer to the modern era, Eichengreen notes that there has to be a credible lender of last resort. For example, as trade moved from the Mediterranean to the Atlantic the florin became less relevant and as British power outstripped that of the Netherlands, the guilder lost its relevance.

 

In discussing the rise and fall of currencies Eichengreen goes into great detail about the trading arrangements of the Florentine bankers who had correspondents across Europe at a time when communication was based on the speed of a horse. He also discusses the critical role of the Spanish Potosi silver mine in Bolivia that made Spain wealthy and it flooded Europe with liquidity. He also discusses how Britain’s Baring Brothers and Hope and Company of the Netherlands funded Thomas Jefferson’s Louisiana Purchase.

 

Now getting back to the fate of the dollar the question is how long will its “exorbitant privilege,” in the words of French finance minister Valerie Giscard d’Estaing, last? The privilege enables the U.S. to borrow in its own currency all the while remaining a safe asset for both private and public sector institutions. In 1971 the world said no more, but after a devaluation the dollar became even more prominent in the global monetary system. So, if the “Nixon Shock” didn’t break it, what would? To Eichengreen, even with all of the U.S.’s current domestic and international troubles there remains no alternative. I am sure the British and the Dutch had similar thoughts, but someone whispering in the ear of Secretary of the Treasury Scott Bessent, should tell him that all glory is fleeting.

The Purim War- Part 5, Deadlock in the Strait of Hormuz*

With the Iranians continuing to prevent shipping from leaving the Persian Gulf and the American Navy blockading the entrance to the Strait of Hormuz, it looks like fighting will resume after the ceasefire ends on Wednesday. To be sure the U.S. delegation is now enroute to Islamabad to negotiate; it remains to be seen if the Iranians will show up. Further it is not clear whether or not the Iranian team can bind the Revolutionary Guard (IRGC) to accept any terms they agree to. From the outside it looks like there is a division between the political and military factions of the government.

 

As we noted last week it is untenable for the U.S to accept Iranian control of the Persian Gulf and for Iran to maintain its uranium enrichment program. ( See: Shulmaven: "Millions for defense, but not one cent for tribute" ) Thus unless there is a change of heart on the part of the IRGC, a resumption in the fighting seems inevitable. A harbinger of that occurred today with the U.S. seizing an Iranian flagged ship in the Indian Ocean. Indeed, should the fighting resume, it will be taken to a more destructive level than we have seen thus far.

 

Thus, the party goers in Friday’s financial markets are likely to suffer a hangover when trading resumes on Monday.

 

*-See: Shulmaven: The Purim War - Part 4, The Ceasefire Fog*

My Review of Odd Arne Westad's "The Coming Storm: Power, Conflict......"

 War Clouds on the Horizon

In a previous blog I noted that we are living in a prewar era analogous to the runup to the start of World War II. (See: https://shulmaven.blogspot.com/2023/11/reliving-1930s-part-5.html ) Here Yale historian and global affairs professor Odd Arne Westad argues that a more appropriate analogy would be that of the prewar period approaching World War I. In many respects his argument parallels that of Graham Allison’s Thucydides Trap where the rise of China is inducing fear in the United States that has the potential to make war inevitable. ( See: https://shulmaven.blogspot.com/2017/08/my-amazon-review-of-graham-allisons.html ) Instead of the Balkans being the hotspot in the pre-1914 world, today we China-Taiwan, Israel-Palestine, Russia-Ukraine, and Pakistan-India. Anyone of which that could put the great powers in play.

 

In the pre-World War I era it was the rise of Germany that was threatening Britain, but Westad goes further by stating the bipolar world of the Cold War is over, and, in fact, we are now living in a multi-polar world with many strong regional actors such as India, Türkiye, Brazil and Iran.  He further analogizes that Russia is the Austria-Hungary of our day by being China’s junior partner. Similar to our time, the pre-World War I era was characterized by rising nationalism and a growing dissatisfaction with globalism. Fear and resentment were the motivating forces of the era. Sound familiar? 

 

My problem with Westad’s book is that he doesn’t offer real solutions, but who can, to the U.S.-China antagonism and for the regional hotspots. Because the book was written prior to the current Iran War, which has the potential for a great power conflict, Westad doesn’t have much to say.  There is also little discussion on the current revolution in military affairs involving drones and artificial intelligence which is greatly influencing the diplomatic chessboard. That said, if pre-World War I is the appropriate analog, we are in for trouble.

 

"Millions for defense, but not one cent for tribute"

 The American delegation to the Iran War peace talks in Pakistan this weekend should take to heart the words of Congressman Samuel Sewall of Massachusetts in 1798 when he shouted out “millions for defense, but not one cent for tribute.” Those words were said in response to French Foreign Minister Talleyrand’s request for a bribe before negotiations would begin to end the quaisi-naval war with France in the so-called "XYZ Affair." 

The United States was only 24 years old and was standing up to the great power of France. We can do no less today with respect to Iran. Simply put, the delegation consisting of Vice President JD Vance, Jared Kushner and Steve Witkoff should put the Iranians on notice that no tribute will be paid by ships passing through the Strait of Hormuz.” Full stop. 

 

The delegation should also remember the first words of the Marine hymn, which begin with “from the halls of Montezuma to the shores of Tripoli…”  Tripoli being the focus of the Barbary Pirate Wars of the early 1800’s. (See:https://shulmaven.blogspot.com/2026/04/the-purim-war-part-4-cease-fire-fog.html) President Thomas Jefferson had no qualms about fighting the Barbary Pirates and certainly the Trump Administration should show the same fortitude in fighting the modern-day Iranian pirates.

The Purim War - Part 4, The Ceasefire Fog*

The rally in the stock and bond markets and the collapse in oil prices is signaling that the Purim War is all but over. That, indeed, may be true, but we are a long way from a final settlement and there is a nontrivial chance that fighting will resume.  In fact, both sides have already reported ceasefire violations. We will know more this weekend when the U.S. and Iranian negotiators meet in Pakistan.

In the meantime, ships aren’t traversing the Hormuz Strait, and it looks like Iran wants to set up a tollway. Should that happen, it would represent a severe challenge to “freedom of navigation” on an international waterway, a concept that the U.S. went to war three times in its history. (War on the Barbary Pirates, The War of 1812, and World War I) If Iran prevails on this issue, it could rightly claim, that despite its enormous tactical defeat, it won a significant strategic victory enabling it to hold the global oil market hostage.

Although President Trump has stated that Iran will give up its enriched uranium and end its nuclear program, this hasn’t been confirmed by word and deed by the Iranians. Remember that ending the Iran nuclear program was the primary goal of the war to begin with. We will learn much on this point in a few days.

 

As we previously noted Israel would take the opportunity to take care of its unfinished business in Lebanon. ( See: https://shulmaven.blogspot.com/2026/02/the-purim-war.html ) As we speak Israel is pounding Hezbollah in Lebanon and both the Iranians and the Pakistanis are saying Israel’s war in Lebanon are part of the overall cease fire. Both the U.S. and Israel believe that it is separate issue.

 

Thus, the way I see it, the war is far from over with the ultimate winner being determined by the Hormuz and nuclear issues.

 

*- See: https://shulmaven.blogspot.com/2026/03/purim-war-part-3-end-game.html

My Review of Matti Friedman's "Out of the Sky: Heroism and Rebirth in Nazi Europe"

 Parachuting into Statehood

While reading Matti Friedman’s wonderful new book, I was reminded of my trip to Prague where I visited the memorial for the dead Czech paratroopers who were gunned down in a Prague Church. (See: https://destinationwwii.com/operation-anthropoid-memorial/ee:) Their mission organized in 1942 by the British under the name Operation Anthropoid succeeded in assassinating Reinhard Heydrich, the butcher of Prague and an architect of the Holocaust. To me, this is Friedman’s best book and I reviewed several of his works before. (See for example: https://shulmaven.blogspot.com/2022/05/my-amazon-review-of-matti-friedmans-who.html )

 

Here we are told the story of another British mission to send newly trained paratroopers into occupied Europe in 1944. The British in cooperation with the Hagenah recruit 32 Jewish citizens of their Palestine Mandate, whose mission was to help downed pilots evade and escape from the Nazi’s. They were chosen because of their language skills and their knowledge of the countries they were to be dropped into. All of them recently escaped from Nazi Europe and now they are choosing to go back into the hell they left.

 

However, the Hagenah has a different mission. That mission is help organize Jewish resistance to the Nazi occupation and to also, if possible, to get them out of Europe. Indeed, the paratroopers are fighting for a state that does not yet exist. The mission has the high-level involvement of the leading figures in the Jewish state in waiting, including its first Prime Minister David Ben Gurion.

 

Of the 32 recruits most die or are captured. Friedman tells the stories of four of them. Haim Hermesh 24, known as the scythe, airdrops into Yugoslavia enroute to Hungary. He like all of them he flies from Cairo to Beri, Italy where he is then parachutes in. He survives. Enzo Sereni, the group leader and a father of three drops into northern Italy. Marta Reick 30, known as Haviva drops into Slovakia where she becomes and important figure in the resistance. Indeed, Freidman takes you into the forests and clearings where the paratroopers landed and their interaction with the local partisans. One thing I did not know, was that for a time the resistance actually controlled a small amount of territory before being overrun by the German army.

 

The most famous of the four was Hannah Senesh 22, the author of the lyrics to “Eli, Eli.” She is the daughter of a famous Hungarian playwright and leaves an extraordinary paper trail. She was captured in Budapest and was killed in prison a few months before the arrival of the Red Army. Her mother was in the same prison with her for awhile and is ultimately freed and ends up in Israel.

 

We also learn from Friedman that the Nazi’s had a good understanding of the operation. Both the Hagenah and the U.S. OSS availed themselves of the services of a double agent in Istanbul. A monumental intelligence failure that put the entire operation at risk.

 

Although from a strict tactical sense the mission of the paratroopers ended up as a failure, in a broader sense the mission succeeded beyond the wildest dreams of its promoters. Their lives become the legends that gave inspiration to the new State of Israel.

 

In order to write the book Friedman researched the Hagenah archives loaded with musty boxes, found unpublished letters from relatives of the paratroopers, and discovered long out of print books. He also visited all of the drop zones of his four protagonists and followed the trail from there. It was a three-year effort, and it paid off in a hell of a good story.   

NATO: R.I.P., b.1949 - d. 2026?

NATO is dead, or in the process of dying. NATO was born when the United States stood alone militarily and economically as the West's  power while Europe was weak. Europe is no longer weak, but it certainly acts that way. If if it had the will, Europe would be capable of defending itself. Hence the founding predicate of NATO no longer holds.

The proximate cause of NATO's demise was President Trump's announcing his willingness to seize Greenland by force from NATO ally Denmark earlier this year, (See:Shulmaven: Donnie Does Davos* and Mayhem in Minneapolis ) his failure to consult on his war plans to attack Iran, and most important the the obstruction of NATO allies Spain, France and Italy to deny their respective airspaces to the U.S. Air Force's efforts to to attack Iran. Indeed they even denied access to the U.S. air bases in those countries. It is one thing for them to be passive, it is far another thing to actually obstruct the U.S. military. 

It is not as if NATO has no skin in the game in the Persian Gulf. Indeed their economies are suffering far more from the rise in the price of oil than the U.S. I don't know what, if anything, President Trump will say tonight on NATO, but the clock is ticking on its demise. Further it will require congressional approval for the United States to withdraw from NATO. Of course, the only winner in this will be Russia's Putin