The US treasury secretary is the principal economic adviser to the president and is responsible for managing a department with an enormous range of responsibilities. According to Treasury’s website, the secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies, and managing the public debt. Saleha Mohsin’s book Paper Soldiers focuses on the treasury secretary’s role in overseeing the management of the US dollar. Mohsin is senior Washington correspondent for Bloomberg News. Paper Soldiers is her first book.

The book’s title gives a visualization by metaphor of the transformation of the dollar into a vehicle for the US government, working with counterpart governments, to impose economic sanctions on the world’s tyrants and rogue nations. The author explains that the dollar and access to it are used as a primary weapon in the aggressive sanctions that the United States applies to such bad actors.

Since the end of World War II, the dollar has had status as the world’s “reserve currency,” meaning that it is a widely used currency, is held in large quantities by central banks as part of their foreign exchange reserves, and is the currency of choice for denominating transactions, for example petrodollars. The question is how long can that status continue.

History of the dollar / Mohsin provides a whirlwind historical review of the dollar prior to the 1990s.

Drawing from a time before the dollar achieved its internationally revered status, she quotes a letter to Congress from Samuel Chase, Abraham Lincoln’s treasury secretary: “Immediate action is of great importance. The Treasury is nearly empty.” She then provides a contemporary opposing view:

What good was paper currency? A mere illusion funded on faith that its issuer held glory worth investing in, perceived as fraudulent and unconstitutional by critics at banks, in Congress, and even inside Chase’s Treasury department.

The reader is then led through the Bretton Woods Conference, where world leaders created “a blueprint for multination economic cooperation,” with the conference acting as the “coronation of the dollar as the world’s reserve asset ... [and] the Golden Age of Capitalism.” The turbulent inflation of the 1970s and the United States’ jettisoning of the gold standard were followed by a floating exchange system and the strong dollar ushered in during the Ronald Reagan and George H.W. Bush presidencies.

Rubin years / During his two years as Bill Clinton’s first treasury secretary, Lloyd Bentsen oversaw an environment with the greenback “plunging” in value and “investors worried about economic growth that remained slow.” It was becoming quite clear that interventions were fruitless and “the era of aggressive government intervention was slowly coming to a close.”

Mohsin contrasts the ensuing Robert Rubin era with eight words from his confirmation hearing before the Senate Finance Committee: “A strong dollar is in our national interest,” a statement Mohsin calls “Rubin’s strong dollar mantra.” Rubin’s underling, Timothy Geithner, described it thusly: “It was a statement of broad intent that we were not going to try to artificially engineer a decline in the currency.”

Based on Mohsin’s analysis, the new policy was a benchmark event in dollar policy and the mantra was carried out and “recite[d] almost on command” by US treasury secretaries for the ensuing 25 years. By 1995, “the dollar began an upward march..., rising roughly 16 percent in the four years [Rubin] was Treasury chief.” About that time, a question from the Wall Street Journal’s William Murray allowed Rubin to describe a goldilocks economic era: “I think the strength of the dollar that we have had for quite some time now has served to lower interest rates, keep a lower inflation rate, and therefore promote job creation and growth in the United States.”

O’Neill and Snow years / The terms of George W. Bush’s first two treasury secretaries, Paul O’Neill and John Snow, were consumed with responding to the September 11 terrorist attacks and their aftermath. Mohsin describes O’Neill as a “curious choice” for the role “considering his complete lack of financial sector experience.” Snow also had a dearth of experience in the sector. The pair carried out the financial response to the attacks:

What happened next revealed to the world just how strong a force the U.S. dollar could be.... It wasn’t about the exchange rate. It was about the dollar as a weapon to punish miscreants, pursue American foreign policy goals and global security objectives—and keep Americans safe.... Bush would begin the war on terrorism by unleashing the power of the U.S. Department of the Treasury ... using the dollar’s power to punish the nation’s enemies.

The tools applied to this task included targeting “entities that had been blocked from the U.S. financial system—meaning they could no longer access the dollar.... Treasury was now part of the national security apparatus ... and the dollar was one of its weapons.”

Paulson years / Mohsin describes Bush’s third and final treasury secretary, Henry Paulson, as the man who “was perfect for the job” and “would go on to help save the entire economy from outright calamity” in the 2007–2009 Great Recession. She obliquely states that his role in bailing out megabanks can be connected to the dollar:

We want the U.S. Treasury Department to be run by people who understand ... the importance of stability and predictability in anything that relates to America’s money and debt.... We need a secretary who can put their personal credibility on the line to protect the nation’s most valuable asset: the dollar.... Paulson being chosen, lobbied, and finally persuaded to accept the job may be the most fortuitous development of the era for the global economy.

I don’t find her argument for this convincing. She grinds on that the secretary must be “willing to think creatively, push the limits of power.... Few private sector jobs can prepare someone for the unique demands of leading Treasury, but running Goldman Sachs comes pretty darn close.” No explanations or supporting citations back up any of these conclusory claims.

She makes short shrift of Paulson’s critics who, she explains, called him “Mr. Bailout”:

Critics say that Paulson was out of control.... But what Paulson wielded was a finance ministry with its power revved to the max.... [His] leadership and the efforts of those who worked alongside him across the administration, Congress, Wall Street, and the Federal Reserve, weren’t mistake-free but they were heroic.

Again, she provides no supporting evidence for this view.

Geithner years / Games of chicken over the debt ceiling occupied much of Treasury’s focus during Barack Obama’s presidency:

Obama needed Congress to increase how much debt his Treasury Department could issue in financial markets. The level at the time was $14 trillion, but Congress already made legal a spending package that called for debt issuance to go above that level. Now the federal government needed that added cash to keep the country running.

Mohsin explains:

Republicans ... were demanding that Democrats outline a plan to eventually bring the country’s finances into better order.... The standoff between the White House and congressional Republicans approached a tipping point.... The entire global financial market was at stake.

Obama’s first treasury secretary, Geithner, told lawmakers, “Breaching the congressionally mandated limit ‘would shake the basic foundation of the entire global financial system. [The] consequences would last for decades.’”

This scenario plays out on a regular basis: Fiery rhetoric is exchanged back and forth, and in the end the two sides complete a last-minute compromise. In this particular confrontation, the “scenario forced Geithner and officials at the Federal Reserve to create a contingency plan if the debt ceiling wasn’t raised.... Treasury and the Fed worked through the mechanics of the backup plan.”

Mnuchin years / The first chapter of Paper Soldiers, “Surviving Donald Trump,” starts with a 2018 quote from Trump treasury secretary Steven Mnuchin: “A weaker dollar is good for us.” The International Monetary Fund’s Christine Lagarde equated that language to an “opening salvo of a currency war.”

Trump economic adviser Peter Navarro emphasized in meetings with the president the decades-old precedent “for the Treasury Department controlling the dollar.” Mohsin begins a later chapter, entitled “A Treasury Heirloom Shattered,” with quotes in sequence from Trump, Navarro, commerce secretary Wilbur Ross, and Mnuchin, all of whom either railed against other countries that were weakening their currencies or against “an excessively strong dollar.” To Mohsin this was all part of Trump’s effort to “redo the world economic order.... Bob Rubin’s strong dollar paradigm was dead.” Long-time allies were concerned the Trump administration would not “abide by long-held commitments of non-intervention” in the currency markets. Mohsin does not enumerate any actual examples of these feared interventions in the dollar market and does not speculate whether such interventions would be likely in a second Trump term.

Yellen years / Mohsin recounts Janet Yellen’s strong statement on the dollar at her confirmation hearing as Joe Biden’s treasury secretary: “The United States does not seek a weaker currency to gain competitive advantage.” But the country soon undertook a currency battle, albeit for a different reason.

Just a year after Yellen became treasury secretary, Russia invaded Ukraine. This triggered a “financial war” that would rely on “a different weapon: the dollar.” Russian President Vladimir Putin would call it “an economic blitzkrieg.” The primary targets were “Russian oligarchs, government officials, businesses and even superyachts, belonging to Putin’s cronies,” a process Mohsin describes as “financially excommunicating the world’s eleventh-largest economy.” She explains that this plan would “leave families hungry, people jobless, and companies with millions of dollars lost,” particularly in Europe.

Sanctioning the Central Bank of Russia and major Russian banks through limiting access to the dollar and international payment systems was at the center of the currency war in an attempt to hamper Putin’s ability to finance his aggression. The author winds up this chapter with foreboding language about what the sanctions mean for the United States and the dollar, with hope that it is not “the start of a downward spiral” for both and that “the consequences of the United States losing its status as the owner of the world’s reserve asset are far-reaching.” She sounds somewhat hopeful with some squishy language as the book closes: “America is likely to continue its reign—which means the dollar will, too.”

Conclusion / Paper Soldiers is a timely book. Its jacket describes the topic of the dollar as “under-discussed,” and that is spot on. When Mohsin chronicles the straightforward factual history, the book is at its best.

But there are a few drafting errors that should have been caught by the author or the editors. The most egregious is a reference to the Great Recession as “the worst financial crisis in a century.” In all my reading on historical financial crises, I have never heard a single commenter state that that crisis was worse than the one that drove the Great Depression.

Another major error is when Mohsin identifies the treasury secretary who was first appointed by Reagan and stayed through the George H.W. Bush presidency as “Nicholas Baker.” This appears to be an erroneous blending of the names of two treasury secretaries from that era: James Baker (who held many roles, including chief of staff and treasury secretary under Reagan and secretary of state and (briefly) chief of staff under Bush) and Nicholas Brady (who did serve as treasury secretary for the end of the Reagan administration and throughout Bush’s).

There are other mistakes, but also many awkward references: first to people in the government as “those who ran the country,” and another that “the Treasury secretary’s job is to grow the U.S. economy and create jobs.”

In contrast to the factual history, the book’s policy analysis is not especially convincing and Mohsin stumbles badly, particularly the noted sections chronicling Paulson’s time as treasury secretary. She really struggles to make an argument that a certain policy path is good and often simply draws conclusions without any underlying analysis or assumes the reader takes the statement as obviously true. As for data, it would have been helpful in discussing the dollar to have a few charts or graphs showing the value of the dollar against other currencies over time. The topic lends itself to such analysis, but there are no charts or graphs in the entire book.