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.