Currency Competition: a Hayekian Perspective on International Monetary Integration

ANTHONY M. ENDRES

Currency Competition: A Hayekian Perspective on International Monetary Integration

Currency internationalization is examined from the vantage point of Friedrich Hayek’s contributions in the 1970s. Compared with received commentaries in which only an idealized case for private money is attributed to Hayek, this paper underscores other dimensions of Hayek’s work on money and currency. Hayek’s case for “choice in currency” draws on his theory of competition, anticipates competition between government suppliers of ﬁat money, accommodates many aspects of international monetary integration, and embodies a distinctive approach to monetary independence, choice of exchange rate regime, and the transnationalization of currency. Hayekian predictions are outlined for future developments in currency competition.

JEL codes: B31, F02, F33, F36 Keywords: currency competition, currency internationalization and transnationalization, Hayek, international ﬁnancial order, monetary independence.

IN THIS PAPER, we revisit Friedrich Hayek’s classic work in the 1970s on monetary denationalization, “choice in currency” and currency competition. The international use of currencies has evolved in a manner that no prominent economist predicted during or at the end of the Bretton Woods era (Solomon 1999, Endres 2005). We establish a Hayekian perspective on the present process of international monetary integration. A different process of “currency denationalization” is now underway than envisaged by expositors and critics of Hayek’s (1978a, 1978b) case for denationalization. We ﬁnd that the essence of a modern process of currency transnationalization is anticipated by Hayek’s monetary work in the 1970s. As well, a Hayekian perspective on recent international ﬁnancial integration does

A longer version of this paper was presented at the Colloquium on Market Institutions and Economic Processes, Department of Economics, New York University, February 2008. I am obliged to Colloquium participants for their comments and to the referee’s helpful remarks.

ANTHONY M. ENDRES is an Associate Professor, Department of Economics, University of Auckland, Auckland, New Zealand (E-mail: [email protected]). Received April 2, 2007; and accepted in revised form December 29, 2008. Journal of Money, Credit and Banking, Vol. 41, No. 6 (September 2009) C 2009 The Ohio State University 1252 : MONEY, CREDIT AND BANKING not recommend detailed, planned reform of the international monetary system; it encapsulates many aspects of modern currency markets, explains the emergence of the present international ﬁnancial architecture, and suggests some possible future developments.1

1. COMPETITION AND CURRENCY

The ongoing competition in the international use of national monies is a salient feature of the present international monetary system. By the 1980s, it was largely taken for granted that some national monies were more commonly used than others in financial intermediation in currency markets, international trade, and settlements (Chrystal 1984). A new terminology developed in which national monies were var- iously referred to as investment currencies, intervention, or reserve currencies, and vehicle currencies for cross-border trade and payments (Hartmann 1999). Moreover, free capital mobility, diminishing cross-border information and transaction costs and the associated decline in home investment bias rendered national currencies much less independent and therefore more “competitive” than at the end of the Bretton Woods era (Greenspan 2005). Altogether the present system incorporates two important notions that Hayek defined carefully in the 1970s: competition and currency. Hayek’s contribution on these matters is relevant to understanding salient aspects of the present international financial system that is characterized by competition and substitution between currencies, the emergence of new currencies such as the euro, the consolidation of currencies, and the use of parallel currencies in some regions. First, in the treatment of competition, Hayek (1948, pp. 94, 97) points out that it “is in large measure competition for reputation or goodwill.” Hayekian competition is all about credibility. Thus, the nature of the commodity called “money” is that it offers services to its users who confer a reputation on it consistent with their previ- ous experience. Hayek also indicates that markets are always in a state of “constant experimentation” in which various “improvements” are being offered to consumers of commodities and services (p. 99). Competition is also a discovery process. Always the process of competition is to some extent “a voyage of exploration into the unknown”; often “unforeseen changes ...require adaptation” in the manner in which a commodity or service is valued. Hayek concludes that competition is “a process of the formation of opinion” depending on the availability and dissemination of information (p. 100–01). Hayek preferred to use the verb “to compete,” thereby emphasizing the fact that competition was a serial process involving what he later termed “rivalry” (Hayek 1978c, p. 208). The particular circumstances of time and place are continually discovered; included in the circumstances are the effects of competitive behavior and the actual and potential actions of competitors. His conception of competition

1. Benjamin Klein (1974, p. 444–45) anticipates Hayek and though his discussion of “international monetary arrangements” refers to conditions in the late Bretton Woods Era, that is, as at 1970. ANTHONY M. ENDRES : 1253 emphasizes the following factors: process or activity, reputation and opinion formation, knowledge dispersion, and discovery including discovery of the forces of potential competition and market orders resulting from discovery procedures rather than deliberate planning. Second, in the treatment of currency it is rarely if ever acknowledged that Hayek’s general insights on competition were implicit in his work on monetary issues in the 1970s.2 His fundamental proposition is that competition will produce “good money” (Hayek 1978b, p. 209). Money is initially deﬁned as “the generally acceptable medium of exchange” (1978b, p. 160). On further examination, however, Hayek abstracts from any particular geographic domain and proposes that money must be understood as a many-dimensional, differentiated phenomenon that may have substitutes along some perceived dimensions. In theory, different kinds of money may exist and can “differ widely in degrees of acceptability (or liquidity, i.e., in the very quality that makes them money), or the groups of people that readily accept them” (1978b, p. 161). Obviously the “ready acceptance” condition for money parallels his discussion in 1946 on competition; for in that treatment, “opinions” of market participants determines what are accepted as goods or services. Of necessity, market opinions are quite changeable. There may be no point therefore in drawing a sharp distinction between “what is money and what is not”; it all depends on the formation of opinion conferring the quality of moneyness in the market for money. Since, in principle, products can be differentiated along various dimensions there need not be only one kind of money. Drawing sharp distinctions between money, near money, and nonmoney does not accord with complex interconnections evident in real life. As a result, for example, “individuals may use different kinds of money to hold (as liquidity reserves), to make contracts for deferred payments, or to keep their accounts in” (p. 161). The term “money” is better used as an adjective rather than a noun, “describing a property which different things could possess to varying degrees” (1978b, pp. 162–63, italics in original). Hayek concludes that a broader, all inclusive term “currency” rather than money is more appropriate because it refers to an exhaustive “continuum in which objects of various degrees of liquidity, or with values that can ﬂuctuate independently of each other, shade into each other in the degree to which they function as money” (1978b, p. 162). The general attributes of “currency” can be re-expressed: they are liquidity services varying in respect of users’ requirements. Competition takes the form of rivalry over reputation between service providers offering various objects that “have currency.” The services rendered would of course vary in terms of the functions demanded by currency users. Currency service providers compete, and both currency users and providers are involved in a discovery process. The expected variability of a currency’s value in a real time, competitive market process is a crucial differentiating feature in the minds of users. The other major

2. Kevin Dowd and David Greenaway (1993, p. 1184) cite Hayek when discussing competition in the context of currency questions but they take the meaning of competition for granted. 1254 : MONEY, CREDIT AND BANKING service provided by currency is that it may satisfy the demand for liquidity before it is used as a medium of exchange. Like Carl Menger ([1871] 1976, p. 262) before him, Hayek accepts the fundamental proposition that no one invents currency in a manner that determines its properties and use for all times and places. Moreover, the liquidity service of currency is not simply inherent in an existing legal tender, fiat money (Hayek 1978b, p. 144). The demand for currency reflects the willingness of individuals to hold it in the light of the credibility of the issuer who must main- tain appropriate management of the quantity of currency in circulation. Ultimately a currency is valued as a medium of exchange. Hayek offers a capsule summary of the reasons for demanding currency: immediate transaction requirements, reserve holding for future needs, as standard of deferred payments, and as unit of account (p. 171). In a portentous remark, Hayek sees no problem with currencies competing to satisfy these four requirements. Competing currencies in any geographical domain can coexist since “[e]lectronic cash registers would probably be developed rapidly, not only to show instantaneously the equivalent of any price in any currency desired, but also connected through the computer with banks so that firms would immediately be credited with the equivalent in the currency in which they kept their accounts” (Hayek 1978b, p. 171). Whether or not the currencies concerned are competing private currencies or government-created fiat currencies, this point applies with equal force. In the modern international financial system, different fiat currency transactions take place instantly across national borders and within given national domains; electronic accounting, invoicing, payments, and receipts now expedite currency conversion.

2. WHY THE PRESENT SYSTEM OF CURRENCY INTERNATIONALIZATION IS HAYEKIAN

It is a fundamental error to cast Hayek’s work currency in terms of an exclusive and idealized case for the privatization of currency and the replacement of national, government-created monies. (The idealized free market option is explained in Hayek 1979). In popularizing this misleading exclusivist position Milton Friedman (1984, p. 43), Milton Friedman and Anna Schwartz (1986, p. 60), and Stanley Fischer (1986) are most strident. George Selgin and Lawrence White (1994, p. 1734) point out that “fiat monies of various governments compete to some extent” without documenting Hayek’s recognition of the implications arising from this important fact. That fiat monies compete, however imperfectly, has implications for potential international currency choices and arrangements. While Hayek idealized currency denationalization he held another preference for the transnationalization of currencies originating from an understanding of the existing, non-laissez faire currency environment. Hayek understood the international dimension and potentialities of global currency competition, currency choice, and currency consolidation. His “Choice in Currency” (1978a) was originally based on an address in 1975 entitled “International Money.” He denied the usefulness of “an international agreement to adopt a particular mechanism ANTHONY M. ENDRES : 1255 or system of policy” for currency creation and management (p. 120). The day-to-day life of markets operating across national jurisdictions would ultimately result in stable or “good” money and at least to some extent protect money from politics. The first substantive point in the 1975 address was generic in that it was not restricted to any brand of money produced by governments or private interests: “why should we not let people choose freely what money they want to use?” (p. 121). Individuals ought to be able freely to choose any currency or commodity (such as gold) for the purposes of enjoying the liquidity services provided. The second point was historically contingent and did not exclude government fiat money as a choice option if it was responsibly produced. The necessary and sufficient check on responsibleness in the production of money was that it was subjected to the discipline of competition. Thus, Hayek contends that “the best thing we could wish governments to do is for, say, all the governments of the Atlantic Community, to bind themselves mutually not to place any restrictions on the free use within their territories of one another’s—or any other— currencies, including the purchase and sale at any price the parties decide upon, or on their use as accounting units” (1978a, p. 121). There was nothing original therefore in Milton Friedman’s (1984, p. 46) “alternative” (to Hayek’s other more radical preference for fully privatized currencies) to “permit different national currencies to compete with one another.” Writing in an era that was just beginning to witness a diminution of the potency of government exchange controls, fewer restrictions on capital movements, and free currency convertibility, Hayek pleaded for free choice in national currencies and completely free financial capital mobility. So-called government monopolies in currency supply aimed at maximizing seigniorage were already rather circumscribed. Exchange controls were certainly one monopoly-bolstering factor as were legal restrictions on the use of spe- cific currencies within national borders. A government’s receipts and outlays were obviously going to be compulsorily denominated in that government’s fiat money. Nevertheless, the idea of isolated groups of residents in a national economies holding one currency for all possible currency services was anathema to Hayek. It was not that he opposed national monies as such; he “opposed ...national economies themselves” (Helleiner 1999, p. 145). If the financial borders between national economies become more permeable, currency competition would occur spontaneously within and through existing legal restrictions. International financial liberalization of the kind currently being experienced im- plies that currencies issued by governments pursuing “responsible monetary policy would tend to displace gradually those of a less reliable character” (Hayek 1978a, p. 123). Hayek (1978b, pp. 208–09) mentions monetary policy credibility though he was skeptical of the possibility that even “very wise politically independent” central bankers would retain a responsible reputation for any prolonged period. Hayekian competition fosters “reputation”; in the realm of currency production, competition would “impose the most effective discipline on governments.” Furthermore, consistent with competition as a discovery process, “people would soon learn to hold the government responsible for the value of money in which they were paid” (p. 123). And in circumstances where national currencies were related by a system of flexible, 1256 : MONEY, CREDIT AND BANKING market-determined exchange rates, national monetary policies were subject to further competitive discipline (p. 125, note 13).3 Hayek envisioned a time when “[e]lectronic calculators which in seconds would give the equivalent of any price in any currency at the current rate, would ...be used everywhere” (1978a, p. 123). In this new financial world, there is no place for an international monetary authority in the Hayekian international financial architecture. International monetary policy coordination either by formal intergovernmental agreements or by international financial institutions is viewed skeptically because of likely inflationary bias built-in to such coordination. Deliberate international monetary policy coordination can reduce the degree of currency competition and reduce the anti-inflation credibility of government currency issuers. This view found support in Roland Vaubel (1983) and Kenneth Rogoff (1985) who demonstrate the inflation-generating risks of formal policy coordination among colluding monetary authorities. At the micro level the international dimension in Hayek’s work is highly relevant to the present system; it turns on allowing individuals to participate in a competitive process in which they are able to switch between national and foreign currencies without government prohibition. Hayekian competition unleashes the discovery potential of free choice: unrestricted opportunities to substitute currencies may “lead to the discovery of yet unknown possibilities in currency” (1978b, p. 223). That there may be transactions costs involved in substitution is recognized, though Hayek again portentously predicted an era when almost instant electronic currency conversion minimizes these costs. The necessity of having just one currency available for all desired currency services in a particular national jurisdiction is obviated by advances in communications and currency market trading technology. The theory of international money identifies factors contributing to the use of national currencies as domestic financial instruments and as international financial instruments by both residents and nonresidents. Ronald McKinnon (1996) offers useful conceptualizations of international currency substitution:

(i) direct currency substitution: residents in a national jurisdiction are able freely to use multiple currencies for transactions within that domain—they hold transaction balances in various currencies and substitute among them; and (ii) indirect currency substitution: residents in a national jurisdiction choose investment or store of value balances denominated in different currencies—this choice indirectly affects the demand for transaction balances in that jurisdiction.

McKinnon (1996, p. 44) proceeds to investigate the macropolicy consequences: what if “currency substitution tends to undermine domestic monetary control”? The modern Hayekian answer is that either direct or indirect currency substitution (which Hayek conﬂated) would weaken national monetary policy and should be undermining of any one government’s monopoly over the production of money. That national

3. Compare Milton Friedman (1984, p. 46): “in a world of ﬂoating, market determined exchange rates, good money will drive out bad money.” ANTHONY M. ENDRES : 1257 jurisdictions, currency and monetary policy are coextensive and instruments of control are something Hayek inveighed against in his search for “good money.”

3. MODERN CURRENCY “INDEPENDENCE”: THE HAYEKIAN VIEW

Exercising independent monetary policy is not costless in the present era of currency substitution—this is Hayek’s main point. A market-determined exchange rate regime makes inflation a national problem when there is only one currency produced for domestic use and substitution is tightly circumscribed by government restrictions. Certainly, in principle, the trend, rate, and variability of inflation are often targeted directly by monetary authorities under floating exchange rates. However, there is scarcely any freedom remaining for monetary authorities if one of the prime exter- nal influences on national monetary policy is the “risk” of free currency substitution whether direct or indirect (Schwartz 2004). Individuals will reassess both the services provided by a national currency in the light of internal and cross border monetary disturbances and inflation expectations. Accordingly, they realign their use of currencies. That national currencies produced by governments are distinct (as brands) is un- exceptionable; that they are completely independent is now questionable.4 In fixed exchange rate regimes buttressed by international currency exchange controls, independence holds strongly within particular “monetary frontiers” (Hayek 1978b, p. 213). There is no evidence in Hayek’s contributions implacably rejecting market- determined exchange rates. He defended fixed exchange rates regimes “only where people wanted flexible exchange rates in order to make inflation easier” (Hayek 1994, p. 150). Market-determined currency exchange rates do not guarantee good, stable international money. Choice in currency was a vital condition for a successful floating rate regime. The breakdown of monetary frontiers means users of currency are not constrained by exchange controls; they are afforded currency choice depending on their requirements for differentiated currency services in the international realm. Under these conditions, Hayekian objections to floating exchange rates completely evaporate and currencies become interdependent (Hayek 1978a, p. 125, note 13). The modern use of international vehicle currencies illustrates Hayek’s position; it denies any need for economists to think in terms of national territories on the one hand, or in terms of engineering an optimal international currency on the other. Tradable goods producers in one national jurisdiction can account for, and settle receipts in, currencies other than the dominant national currency used within their territory of origin. This practice is now commonplace: vehicle currencies are mediums of exchange used for quoting prices, as accounting units, and for settling trades across national borders. In this process of currency transnationalization residents in a particular jurisdiction

4. Compare Lawrence White (1989, p. 141) who refers to “the system of utterly independent and distinct national currencies that has prevailed since 1973.” 1258 : MONEY, CREDIT AND BANKING accept and use “foreign” fiat currencies. In the limit, from a Hayekian perspective, every currency is potentially able to play a role as an international vehicle depending on the outcome of competition and substitution in their use and for their various services.5 In the long history of international money, no government or economist has been able to define, once and for all, a single currency that will satisfy all prospective users’ requirements. In this connection, Charles Kindleberger’s (1989, pp. 55–56) acute historical generalization paralleled Hayek’s: “the market will create additional money or moneys to suit its needs. ...If officials decree only one international money the market will produce more.” The creation of a national legal tender is not sufficient to cause its use in the international realm. The present international hierarchy among various nationally produced, fiat currencies reflects the working out of a long process of currency competition involving network externalities in the use of currencies and the associated depth and scale of currency markets that reduce transaction costs (Dowd and Greenaway 1993). The dominance of particular currencies in the international economy (U.S. dollar, yen, and euro) must also for Hayek (1978b, pp. 188–89) reflect long-run supply-side forces, namely, inflation risk and the associated behavior of monetary authorities in the respective currency producing nations. The international currency market confers “reputation” on the producers of national currencies that is enhanced by having institutions available for trading in those currencies (such as established financial centers and sophisticated currency hedging facilities). Currency consolidation, including the recent deliberate design of the euro (and the U.S. dollar long before that) and dollarization, are not ruled out by taking a Hayekian perspective. Complete or partial abandonment of a national currency by way of adopting the euro (or U.S. dollar) as an international currency is conceivable so long as ongoing currency use is market determined. Even the emergence of the euro possessed Hayekian elements: it was surely founded on the reputation and international competitiveness of the Deutsche mark, particularly in its extensive use as a vehicle and investment currency (Tavlas 1991). The transition to the euro is consistent with Hayek’s (1978b, p. 187) invocation to allow “choice in currency”; choice takes place in a competitive process that does not exclude the possibility of currency consolidation. The market tests for the euro are that it is supplied under the constraints introduced by other currencies also being supplied with a range of actual or potential transnational services (vehicle, investment or quotation services, Yeager 2004). Likewise, the Hayekian perspective endorses parallel currency developments in which national and regional currencies circulate and compete in particular geographic domains (as in recent trends observed in Asian currency integration). Fundamental to such trends is not deliberate engineering of a regional currency, but the market test: currency users would have freely to adopt such currencies (Eichengreen 2006,

5. According to Philipp Hartmann (1999, p. 19), “it appears that nowadays—in a world of relatively integrated goods and capital markets—most industrial countries’ currencies are to some extent interna- tionalized.” ANTHONY M. ENDRES : 1259 pp. 435–36). Benjamin Craig (1996) provides evidence implicitly in support of a Hayekian perspective when documenting the Russian currency experience in the 1990s; dollars were increasingly held and used (illegally) by residents for a range of purposes and this induced the monetary authority producing national fiat currency to produce a more stable currency (i.e., targeting a lower level inflation). Dollarization is more sustainable if it is freely chosen rather than imposed by governments (Schuler 2005, Moreno-Villalaz 2005). Restrictions in the use of currency within national jurisdictions are obviously important in limiting currency substitution and are reinforced by government receipts and outlays denominated in the government-sanctioned and produced currency. Yet the Russian case illustrates how legal tender is continually under threat so long as market participants have some currency choice. Correspond- ingly therefore, legal tender currency is not strictly “a denial of currency competition” as maintained by Pascal Salin (1984, p. 9). Three general conditions are required to meet Hayek’s standard for a viable currency regime: (i) absence of capital and exchange controls, (ii) “greater trust ...in an internationally reputed issuer of money” than in one domestic producer, and (iii) potential for competition that was “nearly as effective as competition in esse” (Hayek 1978b, pp. 214–45). Here the potential for currency competition rests on an ever- present Baumolian element of contestability. Contestability acts inter temporally to check incumbent major government suppliers of currency such as the U.S. dollar, euro, and yen. Potential entrants could be chosen over time to play more active international medium of exchange, quotation, and investment roles if the reputation of one or other currency declines. Production costs of entry will be low since currency manufacture is cheap and the production techniques relatively unsophisticated. The international currency market is conceivably contestable though it is not equivalent to William Baumol’s (1982, pp. 3–4) benchmark case of perfect contestability. Hayek offers insights into the broad dynamics involved in currency contestability when currencies are interdependent and market participants act on a continuous flow of information about the performance of currency issuers.

4. SOME HAYEKIAN PREDICTIONS ON FUTURE CURRENCY ARRANGEMENTS

The prospect has been raised that national monetary policies will be unable to manage the international order in a world characterized by choice in currency and the transnationalization of currency. Benjamin Friedman (1999) conjectured that central banks would be reduced to armies “with only a signal corps.” The possible, diminishing loyalty in demand for any single central-bank-issued money, the growth of nonbank credit, technological advances that are making international financial clear- ing mechanisms cheaper and more efficient, and the vast array of assets regarded and traded as “currency” in modern financial markets are all placing limits on the effec- tiveness of national monetary policies. Friedman’s conclusions would not surprise those taking a Hayekian perspective: 1260 : MONEY, CREDIT AND BANKING

As firms and households, and therefore banks, use currencies other than that of their own country, the country’s geographical space becomes less relevant for indicating over what financial transactions and nonfinancial behavior the central banks’ actions have efficacy. (Friedman 1999, p. 335)

The choice in currency behavior referred to in this passage is occurring without deliberate governmental design—precisely what Hayek (1978b, p. 235) predicted would be essential for the emergence of “good money.” What other Hayekian prognoses may be drawn from the recent the path of events in the international economy? (i) Currency competition will proceed, concomitantly with: the erosion of legal restrictions requiring the monopolization of fiat currency production and use within national jurisdictions, advancement in technology, and more timely communication of information about the credibility of currency issuers. (ii) Competitive pressure will be sustained on government currency issuers in the long run with the currency market focusing on inflation performance within national jurisdictions. (iii) Parallel currencies may become more popular among small open economies participating significantly in trade and payments arrangements within particular regions. (iv) The international financial architecture will not be constructed or controlled once and for all by a single monetary authority; monetary authorities will be rivals in a market for reputation over the transnational services provided by their brand of currency. (v) Key international currencies (U.S. dollar, euro, yen) may remain prevalent as transnational mediums or lose relative market share in an ongoing imperfectly contestable process. Market share changes for different currency services will be affected by transaction costs of substitution, convenience, and the credibility of the currency issuer in part indicated by risk adjusted yield preferences. (vi) National monetary policies will rendered less effective within national boundaries, especially in small open economies producing relatively lower volumes of less reputable currency. (vii) Currency consolidation will become more prevalent partly as a result of prediction 6. (viii) In the long run, expect more “discoveries made by free experimentation” (Hayek 1980, p. 240) with different currencies in the international realm: for instance, new currency areas perhaps in the Middle East and Asia, electronic money, the rise of new key currencies such as the Chinese RMB.

5. SUMMARY

During the 1970s Hayek formulated the “choice in currency” question in a manner far broader than received commentaries on his work have indicated. In the international ANTHONY M. ENDRES : 1261 realm Hayek saw the potential for greater currency competition once existing capital and exchange controls and convertibility restrictions were removed; once financial capital became more mobile across national borders and market-determined currency exchange rates applied to all major currencies. Only then would national currencies compete effectively over the range of international services they offered. Subse- quently, national monetary policies become more restricted and disciplined. Pascal Salin (1984, p. 1) argued that it “is necessary to find the means to reduce the role of government in the production of money.” We have demonstrated that a Hayekian perspective on currency competition does not warrant such a conclusion. A vigorous market in competing government-produced currencies has now emerged in the context of increasing international financial integration. Hayek anticipated these developments. Standard expositions of Hayek’s monetary thought have been misleading. We have punctured the myth that he exclusively favored complete currency privatization. In Hayek’s formulation of “choice in currency,” competition over various transnational services provided by national currencies can result in discoveries, modifications and service innovations that no one currency producer anticipates or intends. Ongoing currency substitution, the formation and persistence of hierarchies in the international use of different currencies, dollarization, currency consolidation including the emergence and continuing acceptability of the euro, parallel currencies and flexible currency exchange rates are all accommodated by Hayek’s “choice in currency” approach. The Hayekian view is naturally opposed to deliberate design of international currency by way of an overarching international monetary blueprint. The demise of Bret- ton Woods arrangements has not led to highly insulated national currency domains and associated government currency monopolies protected by exchange controls. In fact, currency transnationalization is a major feature of the new international financial architecture.

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