U.S. Federal Reserve Board Chairman Ben Bernanke hints at policy change. He is looking for an exit from quantitative easing whereby he has been buying financial assets to the order of $85 billion per month since the end of last year. He has emphasized the exit shall be a “tapering” procedure — no abrupt moves, no jumping on the brakes. Everything will be nice and gradual. Believe me. You really won’t see me go. I shall just fade away.

And yet for all the care that has been taken to massage the markets’ fears, emerging economies are in turmoil. Capital is leaving their shores. Their stock markets have plummeted. Their bonds are losing value and their exchange rates are falling. There is much tension building in global financial markets, and it seems poised to snap once the summer holidays come to an end and people start getting back to work.

Is this just one more case of America sneezing and everyone catching a cold? Are we still living in a world where “the almighty dollar, that great object of universal devotion” (Washington Irving) swings us about with its every move? So it seems, at first glance. And yet a more careful inspection suggests otherwise.

John Connally, who was treasury secretary in the Nixon administration, famously remarked that “The dollar is our currency but your problem.” He said this to a bunch of grumpy European finance ministers who had come to complain about U.S. dollar policies and their inflationary effects on the rest of the world.

That Connally felt he could say such things with impunity tells us a lot about how things stood back then. Mind you, he was not able to be so blase about his dollar policies for long. Shortly thereafter, the United States was forced into terminating the dollar’s gold convertibility. At that point, the dollar became at best a first among equals, rather than that “object of universal devotion” Irving remarked upon.

Be that as it may, the point is that there was indeed a time when the U.S. could afford to stare the rest of the world down in the face of complaints and say “it’s your problem.” Those who are the center of their universe can say that sort of thing. Kings and princes can just go ahead and do whatever they like, and to hell with the consequences. People just have to cope. ‘Tis mine not to worry about others, yours not to tell me what to do but to take my actions as given. That is what living in Pax Americana was all about.

But now we are living in a global era. This is Pax No Man’s Land. It is a place where if anybody sneezes, everybody catches pneumonia. The very fact that Bernanke has to talk about tapering and go to great lengths to ease market jitters points to the altered state of affairs: Bernanke cannot just say “your problem” any more, because if he stirs up too much commotion in the emerging world, the ripple effects will only too quickly come back to strike the U.S. economy — with a vengeance.

Pax No Man’s Land is a precarious place. Nobody is really safe, but everybody has to have a hand in keeping it safe. The other alternative is for everyone to stop minding each other’s business. Everyone could impose capital controls, chase foreign capital — perhaps even foreign people — off their shores and be done with it.

That would spell the end of Pax altogether, never mind whose. But that would never do. All currencies are now everybody’s problem. Everyone beware.

Noriko Hama is an economist and a professor of the Doshisha University Graduate School of Business.

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