Bucking the Buck (PDF)

The US dollar is the world's indispensable currency. The dollar's preeminent status gives the United States enormous coercive powers which it flexes in the form of financial sanctions to punish its adversaries. Over the last twenty years, Washington has relied on financial sanctions with greater and greater frequency. Bucking the Buck argues that the more the United States wields the dollar as a weapon of foreign policy, the more its adversaries will move their international economic activities into other currencies to avoid Washington's coercive reach. Through a combination of case studies and statistical analysis, the book establishes a relationship between US financial sanctions and the rise of "anti-dollar" policies, which are designed to reduce an economy's reliance on the US currency. Though some anti-dollar policies fail to achieve this goal, McDowell's analysis indicates that in many cases they are successful. Patterns of "de-dollarization" following sanctions are clear. In some cases, the anticipation of future sanctions may provoke similar policy measures.

Though McDowell does not conclude that sanctions threaten the dollar's status as the world's key currency, the potential consequences of sanctions overuse remain important. Most notably, the use of sanctions may, over time, weaken their effectiveness as US adversaries develop systems and methods to minimize costs associated with such measures. If the United States wishes to preserve the potency of financial sanctions and protect the dollar's dominant position in the world economy, Bucking the Buck argues that Washington's approach to sanctions use should become more discerning.