Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

In 1944, as World War II was drawing to an end, representatives from 44 nations met at a hotel in Bretton Woods, New Hampshire, to hammer out a new financial system

for the global economy. Out of Bretton Woods came the World Bank, the IMF, and most importantly,

a new role for the US dollar as the international reserve currency. At the time the United States controlled most of the

world's gold, and they agreed to fix the value of the dollar to gold at $35 an ounce. Other

countries then fixed their exchange rates to the dollar, making it the central cog in the system. In 1971, in response to increasing inflation

and high unemployment, Richard Nixon suspended the convertibility of the dollar into gold.

The fixed exchange rate system became a floating exchange rate system, and the Bretton Woods

agreement was dead.

But to this day, the dollar still remains the international reserve currency.

This special role has long irritated other countries.

In the 1960s, the French finance minister coined a term to sum up the contempt. The dollar, he said, had an

exorbitant privilege. Zhang Yan Ling, a former executive from the Bank of China, argued

in a speech last week that the Western sanctions on Russia and the weaponization of finance

that we've seen would cause the US to lose its credibility

and undermine the dollar's hegemony in the long run. She suggested that China should help the world

get rid of the dollar hegemony sooner rather than later. So let's discuss the weaponization of finance, what it means to be a

reserve currency, and to what extent does the United States benefit from reserve currency status.

In the aftermath of the 9-11 attacks, the US President quickly passed the Patriot Act, a controversial law that significantly expanded

the search and surveillance powers of American federal law enforcement and intelligence agencies.

It also gave the Treasury Department the power to cut off financial institutions from the US financial system.

The first country to be threatened under this new law was Ukraine, which was accused of allowing

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