Student Blog – Anna Norkett | The Political Economy of International Money


On April 4th, 2014, I was able to attend The Political Economy of International Money Conference at the Federal Reserve Bank of Dallas thanks to the John G. Tower Center for Political Studies at SMU. I had never been to a Federal Reserve Bank of Dallas before, so once I wandered my way in and made it through the top-notch security, I was impressed by the beautiful building. After checking in, I was led to the auditorium where the conference was being held. While no one was there at first, people started to trickle in from lunch. After a few minutes, everyone settled into their seats, and the program began. I looked around, and only about 40-50 people were in attendance. I was thankful for this opportunity because how many times as a college student can you walk in to the Fed to attend such an intimate discussion with important economists?

The panel consisted of a variety of perspectives: two professors, a senior fellow at the Council of Foreign Affairs, and a deputy assistant secretary for the US Department of the Treasury. While each had his own particular topic, they all focused on currency wars and international monetary arrangements. Coincidentally, these are the same topics we had been learning about in my International Political Economy course at SMU, so it was a beneficial experience to be able to use what we studied in class to follow along in their discussions. In some courses in school, students often ask, “When will we ever use this in the real world?” Well, this conference was a perfect example of how coursework applies. These economists live and breathe this information, so much so that they could stand up at the podium and speak for hours without any notes at all.

Many of the panelists took information I was familiar with and presented it in a new, interesting way.  For example, Benjamin Cohen, Professor of International Political Economy at University of California, Santa Barbara, spoke about the lessons from the Great Depression on the management of currency values. The Great Depression displayed the disadvantages of freely fluctuating exchange rates that invited competitive depreciation (in effect, a currency war) before 1944. In the past, I had learned about the crash of the stock market, but never had I heard a cause of the Great Depression being a currency war.  However, this explains why the compromise at Bretton Woods was to create a par value system of currency that provided stability but also allowed for minimal adjustments. Even this, though, ultimately proved unworkable due to a fundamental disequilibrium in balance of payments. Thus, in 1976, the IMF added an amendment to its Articles of Agreement that allowed a free choice of exchange rate policies that was subject to surveillance only to avoid currency manipulation.  While the IMF tried hard to enforce this surveillance, “dirty floats” have become widespread, and countries such as China have started to practice, to borrow a term from another panelist Brad Sester (Deputy Assistant Secretary for International Economic Analysis for the US Department of the Treasury), “competitive nonappreciation.” To move forward, Cohen looked back at the Tripartite Agreement of 1936, where the United States, Britain, and France all agreed to stabilize their currencies amongst each other. While such an agreement is unlikely to be replicated today, it brings about the idea that the world does not necessarily need one big hegemon; instead, there could be a group of leaders in the international economy. Thus, Cohen suggests the G7 plus China should sit down to compromise on monetary stabilization.

Not only did this conference enforce how important and applicable the information   we learn everyday in class is, but it also gave me a small glimpse into what it would be like as a professional political economist. Political economists create theories based on what they observe happening in the political economy around them by analyzing data and looking for trends. They take lessons from history to amend current policies, always suggesting ways to improve the economy today. They discuss their ideas with other economists and sharpen each other’s points, working together to compromise on the best solution. They take into account different cultures and values to assess how to best come to an agreement between countries.  Say I was not interested in becoming an economist, though. This conference illuminated just how much the economy affects our daily lives. For example, even if someone does not understand what currency misalignment is, they surely know when prices rise because now they have less purchasing power.

Therefore, as both someone who is interested in pursuing economics as a career and a consumer in the economy, I greatly appreciated the opportunity to hear from expert economists speak about such important current issues.