The global imbalances and the contradictions of US monetary hegemony

Over the last decade, the world economy has been characterised by escalating global current account imbalances between the United States (US) and East Asia in particular. This article argues that US monetary hegemony has been a necessary condition for the emergence of these imbalances. It is contended that the notion of structural power is indispensable to understanding the nature of US monetary hegemony and its relation to the imbalances. US monetary structural power has both induced East Asian states to increase their accumulation of dollar-denominated assets and allowed the US to decrease its savings. The article also shows that the mechanisms of US structural monetary power contain several contradictory dynamics that are able to undermine its own purpose, which is to avoid the burden of adjustment to balance-of-payments disequilibria. Journal of International Relations and Development (2010) 13, 105-135. doi:10.1057/jird.2009.36