Exorbitant Obligation

Exorbitant Obligation confronts one of the most persistent assumptions in international political economy: that the global financial system's dollar-centered architecture confers exceptional monetary power on the United States. Many have long held that the dollar's status as the world's key currency affords the United States an "exorbitant privilege": the ability to borrow cheaply, run persistent current account deficits, and deflect adjustment costs onto its creditors. Iain Hardie and Sylvia Maxfield challenge this view by looking instead at the United States's external balance sheet (EBS), which accounts for a nation's international assets and liabilities together rather than in isolated snapshots. Using comparative EBS data from the world's leading economies, they argue that global financialization has steadily eroded the structural advantages once unique to the US, leaving it increasingly constrained in its monetary policy autonomy. Hardie and Maxfield show that the US no longer borrows more cheaply than comparable developed economies, nor is it uniquely able to accumulate international liabilities. Investment in the dollar, they demonstrate, is not the same as investment in the US; vast offshore dollar markets now operate without any US counterparty, limiting rather than enhancing the Federal Reserve's autonomy. And their analysis of the 2008–09, eurozone, and March 2020 crises reveals that the Fed's role as global liquidity backstop reflects obligation, not power. Timely and incisive, Exorbitant Obligation reveals a quietly transformed landscape in which the benefits of key currency status have shrunk, and the US increasingly finds itself a hegemon hoist with its own petard.