Despite signs over the decades that the world role of the dollar has been problematic, and much recent commentary pointing to signs that de-dollarization is happening, questioning of the role of the dollar in the international monetary system has been remarkably untheoretical and unhistorical fashion. Since no heap of facts, no matter how large, can amount to an argument, this is a serious intellectual liability. Moreover, the world has been paying, at least the 1980s, a heavy price for this lack of understanding. The purpose of this paper is to clear up this misunderstanding by pointing to the largely ignored intimate and necessary relationship between financialization-of the Western economies and the pressures they generate for the rest of the world to follow suit, exposing them to dangerous financial and currency volatility-and the dollar-centred international monetary system. This relationship can only be understood by putting the dollar’s world role in the longer historical perspective of the modern international monetary system, going back to the role of the pound sterling under to so-called international gold standard.
