Iran's Dollar Exit: Global Implications for Money & Geopolitics

The tensions between Iran and the United States are being played out on multiple fronts. One of the less frightening is perhaps Iran’s abandonment of the dollar in its financial reporting. But it is also eerily similar to Saddam Hussein’s decision to abandon the dollar in 2000, which is one of the proposed causes of US military aggression in the area in 2003.

This inter-linking relationship between money and the military can also be seen in Trump’s other putative arena of international conflict: his hostility towards China. In particular, his opposition to China’s presence in the South China Sea is inextricable from his claim that the Chinese currency is artificially suppressed to give them a trade advantage.

These international gestures all form part of Trump’s nationalist rhetoric of job creation which is being used to undermine both the international order and the (already minimal) international financial regulatory system. Meanwhile, it is ironic that Wall Street is being freed as never before, all in the name of ostensibly saving Main Street.

The increasingly paradoxical dynamic between the local and the global that this recent rise of isolationism has produced is not only evident on the international stage. There are echoes of it in northwest Britain.

One of 2017’s positive news stories, for example, is the launch of Liverpool’s own local currency. Liverpool’s local pound is part of the city’s regeneration and is designed to keep money circulating within the city rather than allowing it to be funnelled out through the profits of the global companies that loom large in the city’s new shops and arcades.

Recurring themes

This turn to a local alternative currency, is a recurring one. Particularly in moments of economic contraction, the emphasis on local communities and the long-term growth of small and independent businesses, means that these currencies are bound to their local communities, in a way that benefits local people and the environment. Liverpool joins the ranks of Totnes and Bristol in the UK, which have successfully used local currencies to regenerate their economies.

Prioritising the local has clearly discernible benefits in an era of global finance. One of the most recent and radical proponents of alternative currencies, Kojin Karatani, sees these currencies as powerful because they stand outside of the processes of the global financial system. Because their movement is more fixed and because, crucially, they are unable to bear interest these currencies are not subject to the gaming – withdrawal and speculation, the creation of credit and debt – through which the financial industry has distorted the global economy.

Yet it is also important to remember there is nothing inherently or automatically progressive in the existence of these alternative currencies. In fact, their implicit desire for a restricted form of circulation can even be regressive.

Crypto undercurrents

One of the most successful examples of a currency which resisted debt creation, for example, was the early 20th century Social Credit pioneered by CH Douglas, which aimed to take the control of money away from the financial system and give it to ordinary people by creating a “national dividend” that returned the profits of production back to the worker.

Yet the deeply bureaucratic structure of the state that this required, and Douglas’ own deployment of a socially regressive and anti-semitic vocabulary, has meant that his ideas are now frequently associated with a deeply conservative social agenda. More recent alternative currencies, from corporate frequent flyer miles to the libertarian Bitcoin, are clearly designed to evade various aspects of state regulation, rather than benefit local communities.

And therein lies the rub with the launch of Liverpool’s local currency. Its rhetoric is a very familiar one: the claim that it will make money “stick” to the city. Plus, its website proudly claims that its issuers are “members of the Guild of Independent Currencies” and that it will work with “our friends in Bristol, Brixton, Kingston, Totnes” to promote a city-wide currency, which is also “fully regulated by the Bank of England”.

Yet what the website doesn’t reveal as prominently is that this is a virtual cryptocurrency that is issued and supported not by the local community but by Colu, a technology company based in Israel. Hence, although Liverpool’s pound will operate locally, and may well be successful in privileging local businesses, it will also be charging local merchants for this technology. Meanwhile, it will take its profits out of the area and pool the data that it produces in a global network that will allow, for example, “an Israeli barrista” to know “how a Liverpudlian customer likes his or her coffee”.

So, even in the seemingly frictionless age of contemporary cybermoney, it seems that the material provenance of the money that we use – be it the US dollar or the local pound in Liverpool – remains as deeply political and contested as ever. And these politics are often more complicated than their rhetoric suggests.