Dollar Diplomacy in the New Millennium

MichNews.com ^ | Dec 13, 2004 | Noel Sheppard

[RepCath]

In 1909, President William Howard Taft and his Secretary of State, Philander Knox, came up with a rather ingenious foreign policy strategy whereby they tried to garner the support of nations through financial rather than aggressive means. It was referred to as “Dollar Diplomacy” inasmuch as they believed that money would achieve national goals rather than bullets. In the end, it actually failed, but has subsequently been employed by other administrations. Even President Bush to a certain extent used such a strategy in gaining support for the Iraq War.

With the advent of floating exchange rates, and the current level of globalization facing our economy, it appears that a great-grandson of Dollar Diplomacy has emerged. In its current iteration, monetary policy and currency valuations appear to have been manipulated to not only affect international trade, but, in the end, possibly foreign policy as well.