LONG READ: Why Donroe Doctrine has stablecoins and Davos in its sights
Money, like law, only works when backed by enforceable authority.
The core insight behind the Monroe Doctrine is not ideological but structural: order only exists where it can be enforced.
The original Doctrine did not promise universal freedom, free trade, or moral liberalism. It asserted something more modest: that within a defined sphere, rules would be enforced, and outside that sphere, the United States would not pretend to guarantee outcomes it could not control. Sovereignty, protection, and enforcement would be aligned.
Today, the same logic should extend to finance. Money, like law, only works when backed by enforceable authority. This will be familiar to anyone who has ever fallen victim to push payment fraud. Once money crosses over jurisdictional boundaries that recognize Western legal norms, the chances of redress collapse rapidly. Scope for recovery usually depends on the generosity of domestic insurance or bank compensation schemes. That is a problem for a dollar-backstopped financial system that is supposed to draw credibility from its capacity to guarantee settlement no matter what.
The history of American power can, however, be read as a long oscillation between periods when monetary order was tightly coupled to enforceable sovereignty and periods when it was not.
In that respect, Bretton Woods represented the high-water mark of alignment. Under the postwar system, the dollar was embedded in a framework of capital controls, fixed exchange rates, productive dominance, and institutional responsibility.
The United States could credibly underwrite global stability because it ran trade surpluses, produced the world’s industrial goods, and maintained enforcement capacity commensurate with its ambitions. Protectionism at home and investment in development abroad were not contradictions; they were complementary. Empire paid for itself by reinforcing domestic prosperity and security.
Enter the eurodollar
That all stopped with the collapse of Bretton Woods in the early 1970s. The costs of managing a tightly-knit American empire abroad had finally come home to roost, forcing the dollar to float. Capital became mobile, and enforcement began to lag behind monetary reach. In practice, this was the moment Washington surrendered direct command of the dollar system to the faceless forces of international capital. The move would later be compounded by the repeal of Regulation Q — the last serious effort to control the price and terms of access to the backstopped dollar system.
