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Globalizing Capital: A History of the International Monetary System - Second Edition
"Eichengreen's purpose is to provide a brief history of the international monetary system. In this, he succeeds magnificently. Globalizing Capital will become a classic."--Douglas Irwin, University of ChicagoThe importance of the international monetary system is clearly evident in daily news stories about fluctuating currencies and in dramatic events such as the recent reversals in the Mexican economy. It has become increasingly apparent that one cannot understand the international economy without knowing how its monetary system operates. Now Barry Eichengreen presents a brief, lucid book that tells the story of the international financial system over the past 150 years. Globalizing Capital is intended not only for economists but also for a general audience of historians, political scientists, professionals in government and business, and anyone with a broad interest in international economic and political relations. Eichengreen's work demonstrates that insights into the international monetary system and effective principles for governing it can result only if it is seen a historical phenomenon extending from the gold standard period to interwar instability, then to Bretton Woods, and finally to the post-1973 period of fluctuating currencies.Eichengreen analyzes the shift from pegged to floating exchange rates in the 1970s and ascribes that change to the growing capital mobility that has made pegged rates difficult to maintain. However, he shows that capital mobility was also high prior to World War I, yet this did not prevent the maintenance of fixed exchange rates. What was critical for the successful maintenance of fixed exchange rates during that period was the fact that governmentswere relatively insulated from democratic politics and thus from pressure to trade off exchange rate stability for other goals, such as the reduction of unemployment. Today pegging exchange rates would require very radical reforms of a sort that governments are understandably reluctant to embrace. The implication seems undeniable: floating rates are here to stay.
277 pages, Kindle Edition
First published September 30, 1996
About the author
Barry Eichengreen
107 books148 followersBarry Eichengreen* is the George C. Pardee and Helen N. Pardee Professor of Economics and Professor of Political Science at the University of California, Berkeley, where he has taught since 1987. He is a Research Associate of the National Bureau of Economic Research (Cambridge, Massachusetts) and Research Fellow of the Centre for Economic Policy Research (London, England). In 1997-98 he was Senior Policy Advisor at the International Monetary Fund. He is a fellow of the American Academy of Arts and Sciences (class of 1997).
Professor Eichengreen is the convener of the Bellagio Group of academics and economic officials and chair of the Academic Advisory Committee of the Peterson Institute of International Economics. He has held Guggenheim and Fulbright Fellowships and has been a fellow of the Center for Advanced Study in the Behavioral Sciences (Palo Alto) and the Institute for Advanced Study (Berlin). He is a regular monthly columnist for Project Syndicate.
His most recent books are Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (January 2011)(shortlisted for the Financial Times and Goldman Sachs Business Book of the Year Award in 2011), Emerging Giants: China and India in the World Economy, co-edited with Poonam Gupta and Ranjiv Kumar (2010), Labor in the Era of Globalization, co-edited with Clair Brown and Michael Reich (2009), Institutions for Regionalism: Enhancing Asia's Economic Cooperation and Integration, coedited with Jong-Wha Lee (2009), and Fostering Monetary & Financial Cooperation in East Asia, co-edited with Duck-Koo Chung (2009). Other books include Globalizing Capital: A History of the International Monetary System, Second Edition (2008), The European Economy since 1945: Coordinated Capitalism and Beyond (updated paperback edition, 2008), Bond Markets in Latin America: On the Verge of a Big Bang?, co-edited with Eduardo Borensztein, Kevin Cowan, and Ugo Panizza (2008), and China, Asia, and the New World Economy, co-edited with Charles Wyplosz and Yung Chul Park (2008).
Professor Eichengreen was awarded the Economic History Association's Jonathan R.T. Hughes Prize for Excellence in Teaching in 2002 and the University of California at Berkeley Social Science Division's Distinguished Teaching Award in 2004. He is the recipient of a doctor honoris causa from the American University in Paris, and the 2010 recipient of the Schumpeter Prize from the International Schumpeter Society. He was named one of Foreign Policy Magazine 's 100 Leading Global Thinkers in 2011. He is Immediate Past President of the Economic History Association (2010-11 academic year).
* This is the biosketch available at his faculty page.
Professor Eichengreen is the convener of the Bellagio Group of academics and economic officials and chair of the Academic Advisory Committee of the Peterson Institute of International Economics. He has held Guggenheim and Fulbright Fellowships and has been a fellow of the Center for Advanced Study in the Behavioral Sciences (Palo Alto) and the Institute for Advanced Study (Berlin). He is a regular monthly columnist for Project Syndicate.
His most recent books are Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (January 2011)(shortlisted for the Financial Times and Goldman Sachs Business Book of the Year Award in 2011), Emerging Giants: China and India in the World Economy, co-edited with Poonam Gupta and Ranjiv Kumar (2010), Labor in the Era of Globalization, co-edited with Clair Brown and Michael Reich (2009), Institutions for Regionalism: Enhancing Asia's Economic Cooperation and Integration, coedited with Jong-Wha Lee (2009), and Fostering Monetary & Financial Cooperation in East Asia, co-edited with Duck-Koo Chung (2009). Other books include Globalizing Capital: A History of the International Monetary System, Second Edition (2008), The European Economy since 1945: Coordinated Capitalism and Beyond (updated paperback edition, 2008), Bond Markets in Latin America: On the Verge of a Big Bang?, co-edited with Eduardo Borensztein, Kevin Cowan, and Ugo Panizza (2008), and China, Asia, and the New World Economy, co-edited with Charles Wyplosz and Yung Chul Park (2008).
Professor Eichengreen was awarded the Economic History Association's Jonathan R.T. Hughes Prize for Excellence in Teaching in 2002 and the University of California at Berkeley Social Science Division's Distinguished Teaching Award in 2004. He is the recipient of a doctor honoris causa from the American University in Paris, and the 2010 recipient of the Schumpeter Prize from the International Schumpeter Society. He was named one of Foreign Policy Magazine 's 100 Leading Global Thinkers in 2011. He is Immediate Past President of the Economic History Association (2010-11 academic year).
* This is the biosketch available at his faculty page.
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August 15, 2019
A classic history updated with new crises!
Shortly after Eichengreen published the first edition of this well-written book, the world's economy was hit by the Asian financial crisis, the Russian ruble devaluation, and the dot-com crash. After he added that history to the 2nd edition, the US entered the Global Financial Crisis and Europe soon followed with the 2009 Euro crisis. This third edition has arrived as the US is engaged in a trade and currency war with China. You have to wonder what he will be adding to the 4th edition.
KEY POINTS FROM THE BOOK
• The dominant form of money from medieval times had been silver. The gold standard developed accidentally when Sir Isaac Newton, in 1717, serving as the master of the English mint, set too low a gold price for silver, causing most of the silver to disappear from circulation.
• The gold system worked in Britain, France, and Germany in the period before World War I because the central banks and governments made it a priority to guarantee the convertibility of their currency into gold. Working-class citizens had little political influence and often couldn't vote. So central banks were free to impose high-interest rates and high unemployment to maintain currency and exchange rate stability.
• As long as currency speculators believed a government would maintain its gold standard peg, even in the face of competing political interests, currency speculators would trade in the direction that stabilized exchange rates. But when countries began balancing currency stability with other economic interests, currency speculators attacked the currencies of countries that might have to suspend gold convertibility, driving them further down.
• The gold system also depended on international cooperation. In 1890, for example, Britain did not have enough gold to meet the banking crisis when Baring Brothers became insolvent. The Bank of France loaned the Bank of England 3 million pounds, and the Bank of Russia pledged another 1.5 million.
• During the 1970s the countries of western Europe tried a strategy known as the European Snake, where exchange rate fluctuations were maintained within a 2 1/4 percent band. During the 1980s, they created the European Monetary System to prevent large fluctuations. But in 1993 speculators bet that France, facing a deep recession and rising unemployment, could not impose high-interest rates to maintain the franc's parity with the German mark. The franc fell, and fluctuation bands had to be widened to 15%. According to Eichengreen: "limited measures could not succeed in a world of unlimited capital mobility."
• The Global Financial Crisis was not the crisis the world expected. The expected crisis centered around the US current account deficit and China's corresponding surplus. Many feared that the US dollar would crash if China cut back its purchases of US Treasury bonds and the US couldn't finance its budget deficit.
• If during the financial crisis, the US had been operating under the gold standard or had pegged its currency to that of another country's currency, it would have had its hands tied. But because it didn't have to defend the dollar, it could inject liquidity to stabilize the financial system without having to make a stable currency the only goal.
• As long as political democracy and capital mobility increase, countries will find it hard to maintain currency pegs. As Eichengreen sums it up: "A floating exchange rate may not be the best of all worlds. But it is at least a feasible one."
Shortly after Eichengreen published the first edition of this well-written book, the world's economy was hit by the Asian financial crisis, the Russian ruble devaluation, and the dot-com crash. After he added that history to the 2nd edition, the US entered the Global Financial Crisis and Europe soon followed with the 2009 Euro crisis. This third edition has arrived as the US is engaged in a trade and currency war with China. You have to wonder what he will be adding to the 4th edition.
KEY POINTS FROM THE BOOK
• The dominant form of money from medieval times had been silver. The gold standard developed accidentally when Sir Isaac Newton, in 1717, serving as the master of the English mint, set too low a gold price for silver, causing most of the silver to disappear from circulation.
• The gold system worked in Britain, France, and Germany in the period before World War I because the central banks and governments made it a priority to guarantee the convertibility of their currency into gold. Working-class citizens had little political influence and often couldn't vote. So central banks were free to impose high-interest rates and high unemployment to maintain currency and exchange rate stability.
• As long as currency speculators believed a government would maintain its gold standard peg, even in the face of competing political interests, currency speculators would trade in the direction that stabilized exchange rates. But when countries began balancing currency stability with other economic interests, currency speculators attacked the currencies of countries that might have to suspend gold convertibility, driving them further down.
• The gold system also depended on international cooperation. In 1890, for example, Britain did not have enough gold to meet the banking crisis when Baring Brothers became insolvent. The Bank of France loaned the Bank of England 3 million pounds, and the Bank of Russia pledged another 1.5 million.
• During the 1970s the countries of western Europe tried a strategy known as the European Snake, where exchange rate fluctuations were maintained within a 2 1/4 percent band. During the 1980s, they created the European Monetary System to prevent large fluctuations. But in 1993 speculators bet that France, facing a deep recession and rising unemployment, could not impose high-interest rates to maintain the franc's parity with the German mark. The franc fell, and fluctuation bands had to be widened to 15%. According to Eichengreen: "limited measures could not succeed in a world of unlimited capital mobility."
• The Global Financial Crisis was not the crisis the world expected. The expected crisis centered around the US current account deficit and China's corresponding surplus. Many feared that the US dollar would crash if China cut back its purchases of US Treasury bonds and the US couldn't finance its budget deficit.
• If during the financial crisis, the US had been operating under the gold standard or had pegged its currency to that of another country's currency, it would have had its hands tied. But because it didn't have to defend the dollar, it could inject liquidity to stabilize the financial system without having to make a stable currency the only goal.
• As long as political democracy and capital mobility increase, countries will find it hard to maintain currency pegs. As Eichengreen sums it up: "A floating exchange rate may not be the best of all worlds. But it is at least a feasible one."
July 6, 2022
A history of monetary policy since the late 19th century; I previously read the 2nd edition but returned to this one to look something up. The book starts with the peak of the gold standard, backed by the British, from c. 1870 to 1914; other countries attempts to return to the stability of the gold standard post-WWI before leaving for various reasons; the Bretton Woods system and its ultimate collapse; and now the current currency exchange regime of mostly floating exchange rates and with the US dollar still retaining preeminence.
Most recent chapters cover the 2007-2008 financial crisis, the rise of China and its use of capital controls as a tool of monetary policy instead of a floating exchange rate, and opinions on cryptocurrency (bearish on their use as actual currency given their extreme volatility and susceptibility to 51% attacks; this does not preclude their continuing 'use' as a speculative asset).
Most recent chapters cover the 2007-2008 financial crisis, the rise of China and its use of capital controls as a tool of monetary policy instead of a floating exchange rate, and opinions on cryptocurrency (bearish on their use as actual currency given their extreme volatility and susceptibility to 51% attacks; this does not preclude their continuing 'use' as a speculative asset).
July 9, 2018
I initially shelved this to read on the hoped-for assumption that it was a more ambitious book than it is. Fortuitously, I ended up actually reading it because the narrow subject matter it does tackle is something I needed to learn about for another project. So this is a narrative history walking through the steps and crises not of the international finance system in general, but of the gold standard or lack thereof. It begins in the early 1800s in Europe, and remains focused there and on the United States until more or less the 1980s, at which point it finally expands to discuss Asia and the largest South American economies.
I'm always wishing books like this were more mechanistic than narrative. Usually, the problem is that I want mechanistic hypotheses that the available data can't evaluate. This time, I think a big part of it was just that the subject matter is relatively narrow, and much of the mechanistic content is implicit in related issues that Eichengreen doesn't see fit to explain. I'll certainly admit that if I had taken the time to review the macroeconomic concepts involved here, which I have learned at least twice before, I probably would've gotten more out of the book. Still, it seems a bit odd to me that the preface frames the ups and downs the narrative describes as more or less the outcome of a single class struggle.
One side of this more or less make sense to me. The gold standard limited the growth of the money supply and thus prevented both some amount of secular growth in the economy and monetary policy to address recessions. The story of the book is one of governments constantly feeling pressure to devalue their currency, thus increasing export competitiveness and potentially wage growth. The confusing part is that this pressure is only obliged when voting rights are expanded and trade unions become politically influential (though even this change is one that is essentially asserted in the preface and whose influence is largely inferred throughout the narrative). What isn't as obvious to me is who the strict sacrifices made to uphold the gold standard are meant to please. Investors who own debt sufficient to see the value of that debt diminished by inflation and augmented by deflation. Is that all there is to it? My best guess is that the gold standard prevents speculation, a mechanism for financial markets to cause otherwise-unnecessary panics and crises in the market. However, the book suggests that this was a mistake; speculation is more limited by fundamental shifts than imagined and when those fundamentals are bad, the crises will occur regardless of the standard. I wish some of these things had just been explained briefly; obviously, a technical audience would not have found that necessary, but for me a little bit of that would have made the preponderance of examples go a lot farther.
That said, I definitely got what I wanted in terms of background and examples on the gold standard for my current project. The main take-home messages for me were these. First, that the gold standard was more of a winner/loser question than a "is this a good idea?" debate. I lean toward those explanations in general but had never heard one applied to this question. Second, I got a much clearer idea of what preceded the gold standard and how that transition occurred. Coins were made of metals at their exact values, and those values didn't change substantially as long as the value of the metals didn't change. Globalization glutted Europe with metals and increased the scale of international financial trading and investment along with the rest of trade.
Third, the main alternative to the gold standard is exchange rate pegging, which faces the same "trying to stop a river with a stick" issue that the gold standard does. In addition to the internal forces pushing for a consistent currency value, the big problem today is that extreme currency fluctuations are thought to create exchange rate wars, in which countries try to stay competitive by devaluing to counter devaluations of their trading partners. Overall, it seems like there is no ultimately effective way to avoid large fluctuations in currency value. The gold standard as an internal check doesn't work. The exchange rate reserve as an external check is equally ineffective. International cooperative organizations can be useful but only if they are backed by sufficient capital and have the major players on board. For instance, the IMF does not seem to have made a big difference in coordinating currency stability, but the US was able to achieve it in Europe through large and sustained loans.
One of the problems with the narrative rather than mechanistic approach is that it often isn't clear how much an event is due to fundamental economic circumstances and how much it can be attributed to human caprice. The fear that speculation could overwhelm real value in the economy seems to have been misguided. And on a few occasions, Eichengreen provides "rational" explanations for investor behavior that conventional wisdom suggests is something like a collective punishment for a lack of fiscal discipline. At times, political instability itself seems to be more influential than either competing policy might be. On the other hand, governments apparently valued their past reputation more than investors actually cared about. Then there are cases like Austria at the beginning of the Great Depression, a bank failure that might have been bailed out by other countries to protect the international gold standard if those other countries were not recent factors of a bitter war.
There is clearly a collective action problem at work in the system. Eichengreen makes frequent allusion to the fact that countries could easily devalue their currency without setting off the spiral of exchange rate drops if they just did it together, but apparently that has essentially never happened. It isn't entirely clear to me what the optimal cooperation scenario here with look like or how it would be superior to the absence of a consistent trend; devaluation seems to be a country specific strategy applied to deal with internal problems. Is it even possible for a coordinated strategy to provide those fixes? If not, what would be the broader goal of a coordinated strategy? Just to grow the money supply in general?
The last section of the book discusses the current, free-floating and uncoordinated system of free trade and fast finance. Here again I could have used some theoretical grounding. What are the pros and cons of a shared global currency analogous to the Euro? What sorts of perturbations could affect the present system and why are they likely/unlikely? Again, that grounding is something he warns up front I needed to bring to the table and I didn't, so I have no one to blame but myself.
I'm always wishing books like this were more mechanistic than narrative. Usually, the problem is that I want mechanistic hypotheses that the available data can't evaluate. This time, I think a big part of it was just that the subject matter is relatively narrow, and much of the mechanistic content is implicit in related issues that Eichengreen doesn't see fit to explain. I'll certainly admit that if I had taken the time to review the macroeconomic concepts involved here, which I have learned at least twice before, I probably would've gotten more out of the book. Still, it seems a bit odd to me that the preface frames the ups and downs the narrative describes as more or less the outcome of a single class struggle.
One side of this more or less make sense to me. The gold standard limited the growth of the money supply and thus prevented both some amount of secular growth in the economy and monetary policy to address recessions. The story of the book is one of governments constantly feeling pressure to devalue their currency, thus increasing export competitiveness and potentially wage growth. The confusing part is that this pressure is only obliged when voting rights are expanded and trade unions become politically influential (though even this change is one that is essentially asserted in the preface and whose influence is largely inferred throughout the narrative). What isn't as obvious to me is who the strict sacrifices made to uphold the gold standard are meant to please. Investors who own debt sufficient to see the value of that debt diminished by inflation and augmented by deflation. Is that all there is to it? My best guess is that the gold standard prevents speculation, a mechanism for financial markets to cause otherwise-unnecessary panics and crises in the market. However, the book suggests that this was a mistake; speculation is more limited by fundamental shifts than imagined and when those fundamentals are bad, the crises will occur regardless of the standard. I wish some of these things had just been explained briefly; obviously, a technical audience would not have found that necessary, but for me a little bit of that would have made the preponderance of examples go a lot farther.
That said, I definitely got what I wanted in terms of background and examples on the gold standard for my current project. The main take-home messages for me were these. First, that the gold standard was more of a winner/loser question than a "is this a good idea?" debate. I lean toward those explanations in general but had never heard one applied to this question. Second, I got a much clearer idea of what preceded the gold standard and how that transition occurred. Coins were made of metals at their exact values, and those values didn't change substantially as long as the value of the metals didn't change. Globalization glutted Europe with metals and increased the scale of international financial trading and investment along with the rest of trade.
Third, the main alternative to the gold standard is exchange rate pegging, which faces the same "trying to stop a river with a stick" issue that the gold standard does. In addition to the internal forces pushing for a consistent currency value, the big problem today is that extreme currency fluctuations are thought to create exchange rate wars, in which countries try to stay competitive by devaluing to counter devaluations of their trading partners. Overall, it seems like there is no ultimately effective way to avoid large fluctuations in currency value. The gold standard as an internal check doesn't work. The exchange rate reserve as an external check is equally ineffective. International cooperative organizations can be useful but only if they are backed by sufficient capital and have the major players on board. For instance, the IMF does not seem to have made a big difference in coordinating currency stability, but the US was able to achieve it in Europe through large and sustained loans.
One of the problems with the narrative rather than mechanistic approach is that it often isn't clear how much an event is due to fundamental economic circumstances and how much it can be attributed to human caprice. The fear that speculation could overwhelm real value in the economy seems to have been misguided. And on a few occasions, Eichengreen provides "rational" explanations for investor behavior that conventional wisdom suggests is something like a collective punishment for a lack of fiscal discipline. At times, political instability itself seems to be more influential than either competing policy might be. On the other hand, governments apparently valued their past reputation more than investors actually cared about. Then there are cases like Austria at the beginning of the Great Depression, a bank failure that might have been bailed out by other countries to protect the international gold standard if those other countries were not recent factors of a bitter war.
There is clearly a collective action problem at work in the system. Eichengreen makes frequent allusion to the fact that countries could easily devalue their currency without setting off the spiral of exchange rate drops if they just did it together, but apparently that has essentially never happened. It isn't entirely clear to me what the optimal cooperation scenario here with look like or how it would be superior to the absence of a consistent trend; devaluation seems to be a country specific strategy applied to deal with internal problems. Is it even possible for a coordinated strategy to provide those fixes? If not, what would be the broader goal of a coordinated strategy? Just to grow the money supply in general?
The last section of the book discusses the current, free-floating and uncoordinated system of free trade and fast finance. Here again I could have used some theoretical grounding. What are the pros and cons of a shared global currency analogous to the Euro? What sorts of perturbations could affect the present system and why are they likely/unlikely? Again, that grounding is something he warns up front I needed to bring to the table and I didn't, so I have no one to blame but myself.
February 8, 2023
因为篇幅相对短小，所以信息含量就显得比较高了。专业术语层出不穷，我经常读着读着就要去翻查一番，然后停下来仔细想明白，如此才能继续往下读。过程颇不轻松。
短小的篇幅保证了全书主要脉络的简洁性和清晰性，但缺乏细致而渐进的说明，就对读者本身的知识储备提出了比较高的要求。至少于我而言，这部国际货币体系史中的每一个重要阶段，恐怕都需要额外的扩展阅读，才能更好地理解其中的原理和运作机制了。
短小的篇幅保证了全书主要脉络的简洁性和清晰性，但缺乏细致而渐进的说明，就对读者本身的知识储备提出了比较高的要求。至少于我而言，这部国际货币体系史中的每一个重要阶段，恐怕都需要额外的扩展阅读，才能更好地理解其中的原理和运作机制了。
October 16, 2016
Barry Eichengreen hace uno de los recuentos más completos sobre la evolución del sistema monetaria internacional desde los tiempos del surgimiento del patrón oro hasta la crisis financiera de 2008. El libro es particularmente detallado en tres periodos; las diversas rupturas del patron oro durante la primera guerra mundial, durante la gran depresión y durante la segunda guerra mundial, el surgimiento de Bretton Woods y su progresivo deterioro conforme los controles de capitales disminuyeron y los flujos financieros se aceleraron y la ruptura de Bretton Woods y el surgimiento de los esquemas de flotación en el tipo de cambio y el nacimiento del Euro y los imbalances globales entre Estados Unidos y el sureste asiático.
Es una lectura muy recomendada para economistas e historiadores que tengan interés en entender como ha cambiado el funcionamiento de la economía internacional en los últimos 150 años.
Es una lectura muy recomendada para economistas e historiadores que tengan interés en entender como ha cambiado el funcionamiento de la economía internacional en los últimos 150 años.
July 13, 2025
A very nice introduction to the history of international finance. Although I read the third edition, I can’t find it here. BTW, the third edition features the famous Hyun-song Shin on the cover.😂
November 10, 2023
This is a reread of sorts - a read of an updated earlier edition (1996). This is a fairly short but rich history of the International Monetary System. It has been covered in other histories from the period of imperialism in the mid-19th century to the reforms after WW2 and into the 1960s. The period since the 1970s has not received the same attention in serious one volume histories and this book - by a top scholar - works to remedy this. There is much to discuss.
March 2, 2020
A short, but very dense history of the international financial system since the gold standard. I use this as a text book, and it is one of the best histories out there (not too long).
August 8, 2011
Eichengreen does a great job in explaining this complicated subject. Starting from the early days of the markets' globalization in the late 19th century, he traces the transformation and the trial an error of the different international monetary systems. The pre-war gold standard, the interwar chaos, the Great Depression, the Bretton Woods system, the emergence of the Euro, the current financial markets, the US-China trade imbalances, among others, are all explained in this money saga.
Most of the book is centered in the developed countries, but the last chapter also covers the crisis in Argentina, Turkey, and other emerging markets. The advantages and disadvantages of a pegged currency are very well illustrated for the Argentinian case. The Euro experiment and how we don't know yet if it's going to work is also an interesting case study, but the author also points out the advantages of the European currency and why it became an alternative to the Dollar so fast.
The book includes a very useful Glossary that makes the reading much easier. Very recommended if you want to learn about this important topic.
Most of the book is centered in the developed countries, but the last chapter also covers the crisis in Argentina, Turkey, and other emerging markets. The advantages and disadvantages of a pegged currency are very well illustrated for the Argentinian case. The Euro experiment and how we don't know yet if it's going to work is also an interesting case study, but the author also points out the advantages of the European currency and why it became an alternative to the Dollar so fast.
The book includes a very useful Glossary that makes the reading much easier. Very recommended if you want to learn about this important topic.
December 23, 2014
Brilliant, accessible review of global monetary history since the late 19th century. Will demand a second reading shortly, but the first reading nonetheless added greatly to my understanding of the tides of global finance throughout the 20th century and to the ways in which international economic and monetary trends impacted the politics of the 20th century.
February 15, 2015
There's just so much to unpack in this book. I almost wish he'd written a series of books covering each of the chapters in this book. That being said, Eichengreen did a masterful job. If you're at all interest in the international monetary system I highly recommend this book.
June 10, 2025
Eichengreen recounts the history of the international monetary system, starting from the gold standard in the 19th century. The book summarizes shifts in currency regimes from the collapse and brief re-emergence of the gold standard to Bretton Woods and finishes with the emergence of fixed, soft-pegged, and finally floating exchange rates. The role of formal organizations such as the IMF is also touched on throughout the book, often with criticism directed at them; from some brief research I found that Eichengreen has a history at the IMF.
Throughout the book, a theory is offered to justify the shift away from the gold standard and hard currency pegs - namely the broad enfranchisement of global workers, and the rapid increase in cross-border capital flows. To summarize the theory posited, the gold standard was a stable system insofar as investors and speculators were confident that governments and their central banks would reliably subordinate demands such as unemployment and economic growth to the stability of the country's exchange rate. With the global shift towards liberalism and democracy in the 19th and 20th century, confidence waned in the priorities of central banks as the demands of the voter pool became more pressing than currency stability. Further, the ability of investors to easily move capital across borders allowed for rapid decreases in the exchange rates of a given country should confidence wane, making it effectively impossible to defend currency pegs from speculative attacks. The conjunction of these factors is offered as an explanation to the adoption of free, floating exchange rates globally or on the other end, the use of stringent capital controls such as in China.
I don't have a background in finance, so I would be reticent to accept this theory at face value as the impression I get from reading it is that this is indeed Eichengreen's thesis that he is defending. However, I will offer that the theory is conceptually interesting and I found it compelling enough that I'm willing to do some more research on other perspectives to see where I land.
A disappointing aspect of this book is that I expected more of an emphasis on the development of the global financial system, and various securities and trading strategies. Eichengreen constantly alludes to the increasing complexity of the financial system throughout Europe and North America but fails to offer some more colour on exactly how or why this development has occurred. Perhaps I'll need to read another book to fill that gap. There's also a heavy emphasis on Western Europe and the USA, which was slightly disappointing to someone who's from neither region and would've appreciated a more global perspective. The Middle East, for instance, is effectively never covered and Latin America is only referenced in terms of their crises and its impact on more developed markets.
Overall, while I found the book a bit dry and missing certain details, I would recommend giving it a read to anyone interested in learning some more about how modern monetary dynamics have developed into what they are today. 3/5 stars.
Throughout the book, a theory is offered to justify the shift away from the gold standard and hard currency pegs - namely the broad enfranchisement of global workers, and the rapid increase in cross-border capital flows. To summarize the theory posited, the gold standard was a stable system insofar as investors and speculators were confident that governments and their central banks would reliably subordinate demands such as unemployment and economic growth to the stability of the country's exchange rate. With the global shift towards liberalism and democracy in the 19th and 20th century, confidence waned in the priorities of central banks as the demands of the voter pool became more pressing than currency stability. Further, the ability of investors to easily move capital across borders allowed for rapid decreases in the exchange rates of a given country should confidence wane, making it effectively impossible to defend currency pegs from speculative attacks. The conjunction of these factors is offered as an explanation to the adoption of free, floating exchange rates globally or on the other end, the use of stringent capital controls such as in China.
I don't have a background in finance, so I would be reticent to accept this theory at face value as the impression I get from reading it is that this is indeed Eichengreen's thesis that he is defending. However, I will offer that the theory is conceptually interesting and I found it compelling enough that I'm willing to do some more research on other perspectives to see where I land.
A disappointing aspect of this book is that I expected more of an emphasis on the development of the global financial system, and various securities and trading strategies. Eichengreen constantly alludes to the increasing complexity of the financial system throughout Europe and North America but fails to offer some more colour on exactly how or why this development has occurred. Perhaps I'll need to read another book to fill that gap. There's also a heavy emphasis on Western Europe and the USA, which was slightly disappointing to someone who's from neither region and would've appreciated a more global perspective. The Middle East, for instance, is effectively never covered and Latin America is only referenced in terms of their crises and its impact on more developed markets.
Overall, while I found the book a bit dry and missing certain details, I would recommend giving it a read to anyone interested in learning some more about how modern monetary dynamics have developed into what they are today. 3/5 stars.
September 2, 2023
The third edition (2019) of this classic history of the international monetary system is clearly written but still moderately difficult for those (like me) unfamiliar with central banking and international economics. The author thankfully includes a detailed glossary of terms--and there are lots of them--which I referred to often to help understand certain passages. Coverage dates back approximately 150 years, with most attention paid to the post WWII Bretton Woods system and beyond to the present including economic crises of the past three decades in the U.S. (subprime mortgages) and in the Eurozone involving Greece, Spain, Portugal, and Ireland, all of which stressed the system. Two prefatory chapters explain the gold standard--how it started and what lead to its demise.
Eichengreen's detailed century-and-a-half history of the monetary system teaches us: (1) in the earlier period, before WWI, there was an unquestioned commitment by nations and their central banks to a stable exchange rate for trade between countries, based initially on maintaining adequate gold (and/or silver) reserves; (2) from the 20th century onwards, international monetary system stability has more and more depended on exchange rate flexibility; this has been increasingly the case because of increases in capital mobility between countries and regions; (3) political democratization and resulting pressures from internal constituencies to limit inflation and unemployment have made it increasingly challenging for nations to pursue actions aimed at stable currency convertibility; (4) fully understanding the international monetary system today requires knowledge of its past; for example, despite the relatively recent European integration, collaboration among nations has been more the exception than the rule; (5) although not ideal for all nations, floating exchange rates seems unavoidable for the foreseeable future.
Although there is much in Globalizing Capital that I failed to comprehend, I nevertheless learned a lot.
Eichengreen's detailed century-and-a-half history of the monetary system teaches us: (1) in the earlier period, before WWI, there was an unquestioned commitment by nations and their central banks to a stable exchange rate for trade between countries, based initially on maintaining adequate gold (and/or silver) reserves; (2) from the 20th century onwards, international monetary system stability has more and more depended on exchange rate flexibility; this has been increasingly the case because of increases in capital mobility between countries and regions; (3) political democratization and resulting pressures from internal constituencies to limit inflation and unemployment have made it increasingly challenging for nations to pursue actions aimed at stable currency convertibility; (4) fully understanding the international monetary system today requires knowledge of its past; for example, despite the relatively recent European integration, collaboration among nations has been more the exception than the rule; (5) although not ideal for all nations, floating exchange rates seems unavoidable for the foreseeable future.
Although there is much in Globalizing Capital that I failed to comprehend, I nevertheless learned a lot.
July 9, 2023
The strength of this book is giving a dense, informative overview of key issues surrounding international money. Also, the precision and flow are nice for the topics that Eichengreen covers in depth. For these reasons alone, any serious student of money almost has to read it!
There are, however, a couple of crucial omissions, given the scope of events and kinds of concepts this book chooses to dive into.
First, the author characterizes the gold standard as being stable only if policymakers can afford to ignore democratic pressure and prioritize 'free markets' and monetary stability. There's truth to this as far as it goes, for sure. He basically admits that public ignorance was required to stabilize the system. But he fails to mention that the gold standard was unstable at the core. Just before World War I, Britain (the center of the system) had only enough gold to redeem a tiny fraction of the vast quantity of paper sterling that had been printed. He didn't ask the question that, perhaps, this was the true source of the instability that required policymakers to impose economic hardship whenever one of the many financial crises reared its head, to keep the system alive.
Second, the reader gets the distinct feeling that many, if not most, countries prefer pegged exchange rates. This is itself understandable for many reasons, but the author doesn't explain exactly why most countries don't like floating rates. The key reason is that most economies are at the receiving end of the power of the reserve-currency issuer(s), and are subject to severe boom-and-bust cycles as a result. (Eichengreen does give a very good account of this in his 2010 book 'Exorbitant Privilege,' but I was hoping, by 2008, the 2nd edition of this book would have at least a brief mention, given the prominence given to this issue.)
So, read it for what it has (which is very good indeed,) but remember what it doesn't.
There are, however, a couple of crucial omissions, given the scope of events and kinds of concepts this book chooses to dive into.
First, the author characterizes the gold standard as being stable only if policymakers can afford to ignore democratic pressure and prioritize 'free markets' and monetary stability. There's truth to this as far as it goes, for sure. He basically admits that public ignorance was required to stabilize the system. But he fails to mention that the gold standard was unstable at the core. Just before World War I, Britain (the center of the system) had only enough gold to redeem a tiny fraction of the vast quantity of paper sterling that had been printed. He didn't ask the question that, perhaps, this was the true source of the instability that required policymakers to impose economic hardship whenever one of the many financial crises reared its head, to keep the system alive.
Second, the reader gets the distinct feeling that many, if not most, countries prefer pegged exchange rates. This is itself understandable for many reasons, but the author doesn't explain exactly why most countries don't like floating rates. The key reason is that most economies are at the receiving end of the power of the reserve-currency issuer(s), and are subject to severe boom-and-bust cycles as a result. (Eichengreen does give a very good account of this in his 2010 book 'Exorbitant Privilege,' but I was hoping, by 2008, the 2nd edition of this book would have at least a brief mention, given the prominence given to this issue.)
So, read it for what it has (which is very good indeed,) but remember what it doesn't.
June 12, 2021
I would recommend this book to any student of economics as a very helpful (and practical) introduction to monetary arrangements and external accounts relationships. It also boasts a generous bibliographical reference for further study into specific time periods. Eichengreen has a very rare skill of talking about complex chain of events in a very clear, didactic form. His capacity for condensing history and focusing on the most crucial aspects of monetary arrangements also makes a rather dry subject an engaging read.
The book starts with a discussion on how global monetary arrangements come to be (network effects) and then goes on a chronological narrative on the different systems the world has operated under since the gold standard in the XVIII century. I particularly liked how Eichengreen poses most of such discussions as political ones too: frequently works on such topics are very stylized, supposing that policymakers operate in a vacuum and don’t need to take into account the different restrictions imposed by the political system. Underlying all the narrative in this book is how broadening political rights, diplomatic concerns and ideology changed the menu of options available for monetary policy in the last 200 years. It also discusses how expectations played both a stabilizing and destabilizing factor as governments responded under such restrictions.
Overall, the book is very good, especially chapters I and II on the gold standard and the interwar period. However, in some segments, the reading can drag a little, especially in the Bretton Woods segment (I suspect the insane complexity around the agreement bears much of the blame) and the more recent chapters on the financial crisis (here the proximity of the events may have lent to it more details than necessary and would benefit from editing).
The book starts with a discussion on how global monetary arrangements come to be (network effects) and then goes on a chronological narrative on the different systems the world has operated under since the gold standard in the XVIII century. I particularly liked how Eichengreen poses most of such discussions as political ones too: frequently works on such topics are very stylized, supposing that policymakers operate in a vacuum and don’t need to take into account the different restrictions imposed by the political system. Underlying all the narrative in this book is how broadening political rights, diplomatic concerns and ideology changed the menu of options available for monetary policy in the last 200 years. It also discusses how expectations played both a stabilizing and destabilizing factor as governments responded under such restrictions.
Overall, the book is very good, especially chapters I and II on the gold standard and the interwar period. However, in some segments, the reading can drag a little, especially in the Bretton Woods segment (I suspect the insane complexity around the agreement bears much of the blame) and the more recent chapters on the financial crisis (here the proximity of the events may have lent to it more details than necessary and would benefit from editing).
November 23, 2022
This is a wonderful introduction to the history of the monetary system since the XIX century, with a focus on the XX century. It’s well written and spends time both in details and the big picture. If you’re interested in research in this area it will surely spark many new questions.
The only dislocating aspect of the reading was how sometimes the model the author had in mind seemed contradictory. For example, in one country and period capital inflows would be feared to be inflationary, and the same would be true of capital outflows in the next chapter. Clearly, some unexplained things could have been changing between chapters and explain the differences in theoretical predictions, but I would have like to see those upfront.
The only dislocating aspect of the reading was how sometimes the model the author had in mind seemed contradictory. For example, in one country and period capital inflows would be feared to be inflationary, and the same would be true of capital outflows in the next chapter. Clearly, some unexplained things could have been changing between chapters and explain the differences in theoretical predictions, but I would have like to see those upfront.
November 16, 2024
Phenomenal book. Very few nonfiction books can be brief, deep, and cover a broad period of history. This book absolutely succeeds at this task. Eichengreen allows the reader to see the long connections between the gold standard and the modern-day system of free-floating exchange rates. He mixes the history of specific moments in time with the consistent economic laws which govern the international monetary system.
Not a perfect book as an intro to monetary economics as a whole but a fantastic introduction to this specific topic.
Not a perfect book as an intro to monetary economics as a whole but a fantastic introduction to this specific topic.
September 5, 2021
This is a old book, which was updated recently. I read the original edition, a long time ago. It more an analysis of policy changes and historical trends, but much information is missing. The M1+M2 figures, recorded by foreign countries; or the state of the internationalization of Renminbi, plus the nature of the current currency baskets- to name the few I know about, without being an economist. I will probably have to examine some other books, to get some understanding of this.
June 13, 2025
A fantastic overview of the history of the international monetary system. Throughout, Eichengreen emphasizes the tight link between the monetary system and political economy: combinations of policies that were stable under limited democratic accountability, like the gold standard (pegged exchange rate + high capital mobility), turn unstable when governments’ promises become incredible in the face of irresistible political pressure to avoid deflation.
December 28, 2025
Quite possibly the most informative/useful book I read the whole year. If you want to understand monetary policy and the related economic history, this is a perfect place to start. Cleared so many things for me. It is also well written so the reading is quite enjoyable and easy despite the heavy (though interesting) subject matter.
October 22, 2019
I'm an economist and I could not stand this book. It's boring and not well written.
November 14, 2020
A very good overview of International Monetary Systems and the reasons for their failures and successes.
May 25, 2021
nice book for history of money
August 26, 2023
First part has too much numbers and information and not much big picture commentary
October 8, 2023
Short and to the point. Use this to refer back like a dictionary for the monetary system. Nerd alert, it's basically what you think it is
December 16, 2025
good primer, wish did more outside rich countries
March 3, 2017
Approximately as dense as the point which expanded into the big bang, but very informative.
January 19, 2017
Disclaimer: The author spoke at an Asian Forum hosted by Barclay's bank a few years ag0. The bank provided attendees with complimentary copies of books written by conference speakers. So this book was provided free of charge. Kudos to Barclay's for educating their clients.
Even for those who are familiar with macroeconomics and monetary policies, this book is a deep, slow read. Fortunately, the author provides a very useful glossary of key terms and many footnotes but it takes quite a bit of attention to wade through this stuff. Nevertheless, the book offers an excellent overview of major developments that forged the modern global monetary system. Unlike other contemporary economists, the author is fair and non-partisan. Can't say I found this book enjoyable, but am glad I waded through it. No wonder economics is called the "dead science". Barry does a decent job breathing some life into it.
Even for those who are familiar with macroeconomics and monetary policies, this book is a deep, slow read. Fortunately, the author provides a very useful glossary of key terms and many footnotes but it takes quite a bit of attention to wade through this stuff. Nevertheless, the book offers an excellent overview of major developments that forged the modern global monetary system. Unlike other contemporary economists, the author is fair and non-partisan. Can't say I found this book enjoyable, but am glad I waded through it. No wonder economics is called the "dead science". Barry does a decent job breathing some life into it.
May 21, 2010
A bit turgid, this academic history of international banking and the gold standard gave me a lot of perspective on banking and how it came to be the way it is now. Capital is indeed globalized, as necessitated by the need to support foreign exchange in a sane way. (Can you imagine the days when the Bank of England sent clipper ships full of bullion to pay its debts to the Dutch? Feast for pirates!) The book also convinced me that the arguments of the 'gold bugs' -- as to why we need to go back to a currency that is backed by gold -- are fundamentalistic and spurious. For one thing, I am told that if we melted down all the gold in the world, it would only fill up 2 olympic-size swimming pools!
March 22, 2020
A wild ride of the evolution of global currency dynamics from the 1700s onward. Eichengreen's treatment of each historical period is relatively concise, but substantial and complex enough to give a well-rounded sense of the key issues of each era. Overall, great overview of the history of this system - made me feel like I understood palpably more stuff after reading the book. But also, I've found myself asking even more questions about the nitty gritty of the mechanisms and dynamics in each historical period. The book serves it's purpose very well. I'll be digging deeper.
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