How to Move Beyond Monetary Hegemony? Assessing Paths Towards a Global Clearing Union.
Download Working Paper 9/2025
Abstract: Reflecting growing geoeconomic tensions, aggravated by the new trade wars, the expanding BRICS is increasingly feverishly seeking alternatives to US dollar as the hegemonic currency. While the G7 states continue to benefit from, for instance, their central banks’ standing swap lines with the Fed, even they can no longer take their privileged position within the dollar system for granted. The preparedness and perhaps even the willingness of the US to defend dollar hegemony appear to be gone. According to Treasury Secretary Scott Bessent, the country’s long-standing “exorbitant privilege” is instead an “exorbitant burden”.
More generally, mutual trust is eroding, and the world is fragmenting. Yet, at the same time, the need for multilateral cooperation is only growing. In fact, the most serious risks, from climate change to artificial intelligence, are all irreversibly global. Global responses too will thereby be needed whether the relevant actors realize this or not. In monetary affairs, actors should acknowledge that monetary hegemony of any single state, region, or bloc may not even be in its own long-term interests.
As Keynes and others understood already in the 1940s, a common central bank currency issued and governed by a multilateral institution, such as International Clearing Union, is needed. In previous publications, I have argued that updated Global Clearing Union — a 21st century version of ICU remains a normatively and institutionally viable idea. But is it a feasible idea given the current trends? This paper outlines and assesses the feasibility of five prima facie plausible paths toward a worldwide clearing union: (1) the existing international institutions path; (2) the dollar system path; (3) the global conference path; (4) the regional arrangements path; and (5) the coalition of the willing path.
In this paper, I also seek to develop a critical social scientific realist approach to feasibility analysis. I defend specific feasibility conditions and criteria that I argue are relevant for assessing the feasibility of possible paths towards an ICU. Relatedly, the article will summarize relevant parts of a recent Delphi study where a panel consisting of roughly 30 of the best global experts on topic judged the probability, desirability, and strategic relevance of related scenarios based on their own criteria and/or intuitions.
Keywords: Monetary hegemony, Geoeconomic tensions, Global governance, International Clearing union, Feasibility analysis, Plausible paths