goals by “manipulating exchange rate values,” “creating monetary dependence on the part of weaker states,” or “systemically disrupting the international financial order.”24 While Kirshner’s original analysis applied equally to key currency hegemons in both the Bretton Woods and modern-day monetary systems, evidence from 1995-present suggests that the floating rate system and the evolved role of the dollar as a global reserve currency have strengthened the coercive ability of the key currency state. This is particularly true in regard to currency manipulation, which is the most cost effective and opportunistic classification of monetary power. For instance, emerging markets are particularly susceptible to banking and currency crises arising from dollar volatility from American domestic policies such as quantitative easing and interest rate benchmarks. Since less-developed economies cannot borrow in their domestic currency and must do so in the dollar, the burden of foreign exchange risks in business and financial transactions are transferred to emerging markets. Emerging market investments accordingly suffer from currency mismatches and/or maturity mismatches.25 Hausmann suggests that these conditions provide “a recipe for financial fragility,” as they invite for-
eign investors to buy dollars in order to cover their exposures and foreign governments to use currency reserves to defend their currency, which in turn causes the emerging market country’s currency to “depreciate further” and banking system monetary liquidity to “dry up.”26 Without liquidity or the ability to defend its currency, foreign governments have few policy options with which to combat ensuing bank runs. These scenarios are not merely theoretical consequences of international monetary order, as financial volatility in Chile, Mexico, Peru, and Venezuela suggest that emerging market countries suffer significantly at the benefit of the United States and other key currency countries. Emerging market economies face significantly higher levels of average real interest rates, as investors “seek higher returns to compensate for greater instability” and foreign exchange risks.27 There are easily distinguishable political winners and losers from this outcome. Emerging markets and least developed countries (LDCs) suffer from higher domestic inflation and interest rates in addition to diminished autonomy over domestic monetary and fiscal policy controls. The United States, on the contrary, benefits from consistent dollar demand from foreign investors
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