Money, Geographies of

Geography and money are no strangers to each other. A sizeable literature has documented the complex, often contradictory ways in which finance and space are shot through with each other. This topic finds its origins in an earlier sociology of money: Writers as diverse as Karl Marx, Max Weber, Émile Durkheim, and Georg Simmel were all concerned with the relations between modernity and commodification. Under industrial capitalism, for example, and the waves of urbanization it generated, cities arose as sites of new forms of social relations centered on money, leading to the widespread objectification of social relations in which everyone becomes a buyer or a seller. The researchers of the Chicago School of sociology, particularly Louis Wirth, were appalled by the predatory relations and culture of calculation that pervaded capitalist societies as ever more people were drawn into a money economy.

In its broadest sense, therefore, money was instrumental in the time-space compression of capitalism, the formation of the nation-state, and the rise of a global economy. Capitalism without complex systems of finance to lubricate investment and trade is unthinkable. Because money is highly mobile, most attention has focused on the international geography of money and the ways in which money supplies are regulated at the global scale.

The Bretton Woods agreements negotiated in New Hampshire following World War II, erected at the behest of the United States, led to the “Bretton Woods system” of international financial management and the General Agreement on Tariffs and Trade (GATT). Between 1947 and 1971, there was very little exchange rate fluctuation; most currencies outside of the Soviet bloc of states were pegged to the U.S. dollar, fluctuating only within 2% in a given year without International Money Fund (IMF) intervention. The dollar, in turn, was pegged to gold, at $35 an ounce. The fixed exchange rate system required the free international movement of gold as well as minimal government interventions to offset its effects, such as changes in the money supply designed to change real interest rates. The regulations on exchange rates imposed by Bretton Woods were largely designed to avoid the rounds of depreciations that deepened the Great Depression of the 1930s. Under this system of international regulation, currency appreciations or depreciations reflected government fiscal and monetary policies within a system of relatively nationally contained financial markets in which central bank intervention was effective. Trade balances and foreign exchange markets tended to be strongly connected: Rising imports caused a currency to decline in value as domestic buyers needed more foreign currency to finance purchases.

The system of stable currencies ended abruptly with the collapse of the Bretton Woods agreement in 1971 and the shift to floating exchange rates in 1973. The system's demise reflected U.S. trade imbalances with its European partners and the overvaluation of the dollar, whose strength was maintained only through a steady outflow of gold. The accumulation of U.S. dollars overseas, which significantly enhanced the growing Euromarket in the 1960s, contributed to an increasingly unviable trade imbalance. Finally, President Richard Nixon announced that the United States would no longer abide by the Bretton Woods rules governing the dollar's convertibility to gold, forcing a global switch to flexible exchange rates. Hereafter, supply and demand would dictate the value of a nation's currency, and currency trading became big business.

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