State and the Reemergence of Global Finance: From Bretton Woods to the 1990s by Eric Helleiner is a fascinating book on the politics of international plumbing. As a macro person, I focus on models and price relationships, rather than regulation or international relationships across countries. This book highlights the significant impact of global policy choices by states on markets. This should be viewed as obvious, but we often focus on innovation and market forces as the drivers of change; however, it is frequently the will of the state that is the major contributing factor. Financial globalization was not an organic change to the international order but was orchestrated through the policies and dictates of state players. This was a different perspective that I did not fully appreciate.
Clearly, the world is being reset with respect to trade through tariff policies; however, we cannot forget that the world can also change through policies that impact capital markets and flows. Capital markets may have a greater impact on inter-country dynamics. While we have not seen capital flow policies change directly, the talk for a weaker dollar is clearly having an impact on flows. The sanctions placed on countries also have a flow constraint. We have not changed policies on capital controls, but the weakening of international organizations has spillover effects on capital flows. Financial globalization or deglobalization is in the hands of policymakers, and should be given more attention by all in finance.
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