Geo-financial risks in the new world disorder
- Karl Pichelmann
- Jul 16
- 2 min read
Before the Bureau’s summer recess, the conversations in June and July 2025 touched upon various geo-economical aspects of present-day disorder. In a relatively free-flowing discussion format, participants took up issues such as the brave new world of trade and tariffs, global economic prospects and imbalances, and the changing nature of the economic framework for international monetary and financial relations. A common thread of the debate was the notion of disintegrating hegemonic stability catapulting us in a much more dangerous fragile situation, with possibly even more dire consequences than a century ago. This teaser does not attempt to summarize the rich arguments brought forward in the debate; and anyway, many participants hoped that there is still time to take a different road. Instead, we provide a suggestion for summer readings recommending two contributions that informed the recent Bureau conversations.
On the occasion of the Andrew Crockett Memorial Lecture at the BIS, Basel June 2025, Maury Obstfeld discussed the inherent tensions in the international monetary and financial system (IFMS) from the Bretton Woods system, the prevailing arrangements after its demise, to the different fork in the road taken by the present US administration. With its international policies based on the premise that current global trade, financial and geopolitical arrangements have unfairly disadvantaged the US, Obstfeld concludes that this approach, if pursued without compromise, would recast the IMFS by fragmenting financial markets and diminishing the dollar’s central role.
The second recommendation is a book review by Laurent Le Maux of Perry Mehrling’s book Money and Empire: Charles P. Kindleberger and the Dollar System. Charles Kindleberger ranks as one of the twentieth century’s best-known and most influential international economists, and he is often associated with the so-called hegemonic stability theory. As pointed out in the review, Mehrling emphasises that this association disregards how Kindleberger addressed the question of international lending of last resort. Kindleberger was particularly interested in the establishment of swap line arrangements between the Federal Reserve and other major Central Banks to ensure the liquidity of the international financial system. Clearly, the prospect of “weaponizing” swap line arrangements for (US) national interests adds a new dimension to global financial stability risks and the question of additional regional stability anchors.
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