Sovereign Solvency as Monetary Power

Abstract

This article reconceptualizes sovereign insolvency from a money-centred perspective. Drawing on contemporary critiques of money and finance, it argues that as long as the international monetary system is structured upon a hierarchy of currencies, monetary power determines the solvency of sovereign states. The ability to issue debt in own currency and the degree to which such currency performs the functions of money at an international level are the most important factors underpinning solvency. Sovereign insolvencies are inherent to the asymmetric character of global liquidity, rather than solely the product of fiscal misfortunes or mismanagement. To correct those asymmetries, it is necessary to reset the international monetary system. Yet insofar as this reform does not materialize, an international sovereign bankruptcy mechanism is indispensable to ensuring a more equitable global economic order.