Money, Geography of

Geography and money are no strangers to each other. A sizable 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 all were concerned with the relations between modernity and commodification. For example, under industrial capitalism and the waves of urbanization it generated, cities arose as sites of new forms of social relations centered on money, leading to a widespread objectification of social relations in which everyone becomes a buyer or a seller. The Chicago School, particularly Louis Wirth, was 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.

Under the Bretton Woods agreement erected by the United States, there was very little exchange rate fluctuation from 1947 to 1971; most currencies were pegged to the U.S. dollar, fluctuating only within 2% within a given year without International Monetary Fund intervention. The dollar, in turn, was pegged to gold (at $35/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 for exchange rates imposed by Bretton Woods were designed largely 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, reflecting 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 during the 1960s, contributed to an increasingly unviable trade imbalance. Finally, President Richard Nixon announced that the United States no longer would abide by the Bretton Woods rules governing the dollar's convertibility to gold, forcing a global switch to flexible exchange rates. Thereafter, supply and demand would dictate the value of a nation's currency, and currency trading became big business.

[Page 311]The global sea change in capitalism that began with the traumatic petrocrises of the 1970s and massive restructuring of industrialized economies included a fundamental renegotiation of the relations between financial capital and space. Freed from many of the technological and political barriers to movement, capital has become not only mobile but also hypermobile. A key part of this new order was the emergence of what might be called stateless money, which originated in its contemporary form through the Euromarket. Originally, the Euromarket comprised only trade in assets denominated in U.S. dollars but not located in the United States; today, it has spread far beyond Europe and includes all trade in financial assets outside of the country of issue (e.g., Eurobonds, Eurocurrencies). One of the Euromarket's prime advantages was its lack of national regulations; unfettered by national restrictions, it has been upheld by neoclassical economists as the model of market efficiency.

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