The US dollar system as a source of international disorder

In this paper, Farell and Davies focus on the destabilising dynamics of the shift on the financial system, describing how a U.S. dollar strategy initially intended to stabilise the global economy has wound up being a source of disorder, one reinforced by positive feedback loops and phenomena such as ‘viral governance’. Their historical narrative identifies growing risks that could have runway effects, particularly in the context of growing global reliance on digital currencies. They identify a paradox in the current US administration’s relationship to cryptocurrency regulation, which is moving in an increasingly liberal direction. This threatens to create an awkward inconsistency, whereby illicit activity becomes more likely to evade sanction and coercive instruments, whereas traditional mainstream activity may be subject to ever increasing demands for control. Farrell and Davies also highlight a potential upcoming clash between the US and the EU on use of digital currencies to undergird alternative payment and clearing systems that could have significant global implications.