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Some key points from this discussion on the geostrategic and security dimensions of monetary policy, which Fed officials & US policy makers ignore at their peril:

Starting book quote "If the contemporary hegemon has an unknowing headquarters, it's the Eccles building in DC."

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- No doubt security relationships promote use of the dollar, just as security relationships promoted use of Sterling in the 19th Cent.

- An incompetent, reckless, inadequately supervised banking system blew up the world and yet global capital moved INTO US debt.
- Custodian of global reserve currency (Fed) is ipso factor underpinning U.S. global hegemonic power, a powerful responsibility.

- Debt ceiling brinksmanship is playing w/ fire: "risks undermining US position in the world"
- UST volatility and political unreliability may undermine foreign reserve managers willingness to hold "so many dollars"

- Implications are not only to those in finance, but those "in the pentagon, in the state department, & the people who will be in those depts" 5-10 yrs out.
- "Sterling's struggle at beginning at 20th cent. accompanied and accelerated decline of British power and Fed shouldn't make the same mistakes"

- Agencies like the Fed have a narrow mandate, but their decisions have national security strategic consequences, often sidelined.
- Example: Delaying swap line to India (a key geostrategic partner) shows cross-wise implications of monetary decisions to US geopolitical interests

- China is shopping around their swap lines as part of growing competition to execute strategic financial diplomacy
- This China-competition dynamic might lead to increasing provision of dollar swap lines, as they are used to keep tipping powers in the US geoconomic orbit, a purpose for which they were not designed, and which may run contrary to monetary policy objectives
- "Anyone who takes this position [yuan's marginal internationalization] in office needs to re-think it every week, because they'll be a week, perhaps, where they think 'oh my goodness, yuan is achieving critical mass! we left it too late to keep these people using the dollar.'"
- Heart of Bretton Woods treaty was making dollar proximate reserve currency linked to gold

- Simon's trip to KSA is critical example of intersection of monetary and security policy, which showed how siloes between these areas breakdown in moments of acute geostrategic crisis.
- Lesson for present circumstances is similar: these intellectual and technocratic siloes (b/t economic, monetary, foreign, military, etc. policy) are hindering integrate strategic decision-making at a time when there's a "bigger game" afoot.
- Fed is de facto an "international organization" that doesn't sufficiently take into account global spillovers, and also lacks the democratic legitimacy from the global subjects of its decisions

- Newly powerful states don't rely on the US security umbrella and want own rules
- Global moral hazard problem of being global lender of last resort (via swap lines, FIMA repo) to keep states in the dollar sphere of influence

- Fed needs to have a sense of responsibility as steward of global dollar system, essentially a monetary commons/public good
- Fed Chairs have often been dismissive of international/security dimensions of their role, and this is a problem

- "All policy is security policy" which is an increasing trend: "Economic Security is National Security"
- Securitization of economic policy returning to cold war era of CoComs (Coordinating Committees) to control exports, technology, etc, which needs to be reactivated

- But this can sometimes slip into a form of domestic protectionism that has nothing to do with national security
- Quite a big risk of excess here: where national security logic imposed on economic policy turns US economic into "Fortress United States", which can be welfare-depleting

- Western CBDCs need to be guided by clear liberal principles in contrast to China's authoritarian model
- Western policymakers have been too dazzled by the techy aspects of CBDCs, without setting clear, high-level constraints on their development

- This sets boundaries to mid-level technocrats and limits risk of slippery slope that undermines our political economy
- International regimes reflect liberal values (from US, British, and French heritage)

- Shouldn't expect China to smoothly accept that regime, but need to respect it ourselves (why we value what we value) and defend it.

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Great thread. Just ordered Paul Tucker's book "Global Discord" myself. Thanks for flagging it, @matthew_pines!