The “Power Discount Rate” in World Politics and the Devaluation of the U.S. Dollar
Author: Huang QixuanSilver Editor Source: Contemporary Asia Pacific StudiesTime :2014-04-09 14:18:00
Abstract: After World War II, the U. S. dollar experienced three waves of depreciation. In one sense, the devaluation of the U. S. dollar illustrates how the U. S. used the dollar’s position as a key international currency to unload its economic burden on other states. This article traces changes in the “power discount rate” to explain changes in America’s role within the international currency system. When American faces strong external challenges and its hegemonic stability is threatened, its “power discount rate” rises, or in other words it pays more attention to short term interests and disregards long term interests. This causes the U. S. to shift from being a “beneficent hegemon” within the international monetary system to being a “malignant hegemon” .The three waves of U. S. dollar depreciation occurred under just this type of political logic. The international monetary system is tiered, and the key international currency is determined on the basis of power. Securing state interests within the international monetary system is linked to both economic and security autonomy.
