There exists a divide between monetary history and financial history despite the obvious link between the two, as each deals with money. Monetary history has, as its focus, the world of monetary policy and the role and development of central banks. Financial history deals with the origins and workings of banks and financial markets. The former has little to say about business while the latter recognizes the motivation that comes from the need to generate profits. The effect of this divide is that those writing monetary history tend to be monetary economists, seeking to use the past as a way of understanding the objectives and consequences of government intervention in the monetary system and so predict future trends. In contrast, financial history tends to be undertaken by historians with an interest in explaining the diversity of past experience and what lessons it may provide. This book falls into the former category as it is driven by present day concerns and looks to the past as a guide to the future. The first concern is whether the U.S. dollar is likely to be eclipsed in the near future by the Chinese renminbi as the most important currency in the world. The second is what the future holds for the Euro. Both these considerations drive the agenda of this book, especially the former.

Such aims are to be expected from the authors with one, Barry Eichengreen, being a former advisor to the International Monetary Fund, while the other two, Arnaud Mehl and Livia Chiţu, are currently economists at the European Central Bank. The authors have benefitted from these positions, held either in the past or currently, giving them unparalleled access to the central banks’ data. One important result of their research is the new data series, presented in this book, on the currency composition of central bank reserves over the course of the twentieth century. After being told that the information that they required was not available, intervention by a central bank governor led to its miraculous appearance (p. xiv). Conversely, there is a hint in the book that they may have become captive to the views of central bankers. This shows itself most in chapter 10, which is on the creation and future of the Euro. What is ignored is the fact that the United Kingdom did not join the Euro, so the Eurozone is not equivalent to the European Union, making it different from the U.S. dollar and the United States. This matters because the dominant market in both the currency and Euro-denominated financial products is in London, which is outside the Eurozone. That aside, the overriding theme of the book is explaining how the dollar became the dominant international currency during the twentieth century, displacing the British pound in the process.

The book takes issue with the orthodox views among monetary historians, which describes a world where a single currency dominates and then is replaced by another. In this interpretation the pound dominated the century until it was replaced by the dollar in the twentieth century, with the only question being when this happened. In contrast to that view, the authors describe a world of competing currencies in which none dominated. That leaves the more recent past, where only the dollar plays a global role, as the aberration. Important as the pound was before World War I, it faced strong competition from both the French franc and the German mark as international currencies. The interwar years that followed were ones in which the dollar replaced the franc and the mark and competed with the pound for primacy, until replacing it from the 1950s. The dollar has retained its position despite a brief challenge from the Japanese yen in the 1980s and the more recent appearance of the Euro. All this is ably discussed in the book supported by both the new data the authors have collected and the use of mathematical modeling. Based on the composition of currencies held as foreign reserves by banks, they suggest that the dollar replaced the pound in the 1920s as the world's most important currency. The dollar then fell back in the 1930s due to the financial crisis in the United States and lost out again during the 1940s as the pound became the currency in which the countries of the British Empire and Commonwealth held their reserves. The dollar then triumphed in the 1950s and 1960s as confidence in the pound collapsed in the face of that country's economic difficulties.

What emerges from this account of the ascendancy of the dollar in the twentieth century is the lack of inevitability. The weak position of the dollar before World War I, despite the emergence of the United States as an economic superpower, was caused by the impediments placed in its way by U.S. authorities, including the lack of a central bank to act as lender of last resort and the restrictions placed on the international expansion of U.S. banks. With the establishment of the Federal Reserve in 1913 and the associated removal of restrictions on U.S. banks opening foreign branches, the way was clear for the dollar to take its place among the leading international currencies, which it did during World War I and the 1920s; but it was not until after World War II that its eventual supremacy was achieved. In their explanation for the ascendancy of the dollar, the authors stress the importance of market infrastructure and bank networks rather than the effects of two world wars. Others may choose to differ pointing out that holdings of foreign reserves by central banks do not provide a complete picture of the use to which currencies were put in international trade and finance. Money serves many different masters of which being a store of value is only one. Nevertheless, the authors’ points about the importance of a sophisticated market infrastructure in supporting internationalization of a currency are well developed and explain the early importance of the pound, the limited use of the dollar before 1914, the failure of the Japanese yen to develop into a global currency, and the weakness in the position of the Chinese renminbi. Without a deep and liquid domestic market a currency struggles to be adopted internationally. The same could be said of the Euro as the market infrastructure and global connections that support it are centered in London, located in a nonmember country, despite attempts by Eurozone governments to dislodge it. Unfortunately, that issue is not taken up.

Novel as this alternative world of competing currencies may appear to monetary historians it is hardly new to financial historians, including this reviewer. From their studies of financial centers, markets, and banks, financial historians have long accepted the importance of multiple currencies, especially in the era before World War I. They have also sought explanations for the weakness of the dollar's international position and traced it to regulation-induced flaws within the U.S. banking system before World War I, legislation in the 1930s, and the continuance of controls and restrictions long after World War II. Important as the dollar became as an international currency from the 1950s onward, much of that rested on its use in the London-based Eurodollar market, populated by the branches of U.S. banks from which they managed their global operations. While this book takes an important step toward marrying monetary and financial history, much more needs to be done, from both directions, in combining the two approaches. Only then will a fuller explanation emerge of how global currencies have worked in the past, how they work today, and what that tells us about the future.