Jess Hoversen grew up in Chicago. At ten, walking past the Chicago Board of Trade on LaSalle Street, she decided she would work there one day. At twenty she did, starting as an intern at the exchange and then trading currencies as the pits gave way to the screens, mostly in financial futures and options. She moved to MF Global as an FX and bond strategist, and watched the firm’s European debt position bring it down in 2011. Wanting to serve in government, she joined the CIA, and spent thirteen years as an economist across the Agency and the Departments of State and Treasury, latterly as a Treasury and Office of Foreign Assets Control (OFAC) attaché in Bogotá. She is now chief economist at Column, a nationally chartered bank and technology company in San Francisco, where she writes the newsletter Hegemoney.
Jess is one of the few people to have seen dollar power from both sides of the desk, as a trader who priced the currency and as a national security economist who helped wield it. On the floor she learned that currencies move on interest rate and growth differentials. At MF Global she saw a third force. When a colleague called the euro Europe’s answer to centuries of war, she realized a currency is also an instrument of statecraft. Her work centres on what sustains that leverage for the dollar. Most commentary asks whether the dollar is losing its reserve status; she thinks that is the wrong measure. The better question, she argues, is where the dollar is dominant rather than why, and whether anyone in Washington is still working to keep it there.
In this conversation, Jess explains why the fixation on reserve status misreads the dollar, and why its use as a vehicle currency, the rail two countries reach for when neither wants the other’s money, is the better gauge. She reads the surge in central bank gold as a sign of a new geoeconomic paradigm rather than a transactional rival, and argues that payment infrastructure now sits alongside economic size and deep markets as a pillar of dollar power. She dates the turn to alternatives to 2014 and the response to Crimea, draws the parallel with the eurodollar market of the 1960s, where even eurodollars had to touch the US system whilst many stablecoins now may not, and reads China’s aim as survival and alternatives, with Panda and Dim Sum bonds as the signposts to watch. She warns the United States to steel-man both sides of the trade-imbalance debate before repeating Europe’s mistake on austerity. Her case throughout is that the dollar erodes slowly, one per cent at a time, and that Washington has been too complacent to contest it.
Jess writes Hegemoney and is on Substack, and on X at @JessicaHoversen.
Marieke: Hi, I’m Marieke Flament.
Nicolas: And I’m Nicolas Colin.
Marieke Flament: And this is the Currency of Power podcast, the companion to the Currency of Power newsletter, where we dig into currencies, power, and the people connecting the two.
Today’s guest is someone uniquely positioned to discuss the power the dollar holds and what could realistically alter it. Jess Hoversen is the chief economist at Column, a nationally chartered bank and technology company in San Francisco. Jess writes analysis on geoeconomics and the dollar at Hegemoney, a Substack newsletter we’ve been really enjoying. For 13 years, Jess served as a senior economist at the Departments of Treasury and State and at the CIA. She’s also a former FX strategist and derivatives trader. Jess has years of experience in sanctions, international currencies, financial infrastructure, SWIFT, international payment systems, tech, and the macro conditions around the dollar. The perfect guest for Currency of Power. Jess, great to have you with us.
Jess: Thank you both so much for having me. It’s a real pleasure to be here, and I really appreciate the opportunity to talk with you today.
“Currencies are not just a tool of commerce, they are a tool of leverage”
Marieke: Thanks, Jess, for joining. We’re really looking forward to the conversation. Today’s episode should run in three parts. First, we’ll go into your background and your story, which is always interesting to hear. Then we’ll go into why dollar dominance is actually more durable than most people think, and the mechanics of the power that comes with the dollar, which you write a lot about. And then we’ll talk about the pressure points, the things that could challenge that power, and the role that tokenization and stablecoins play in the whole landscape. So the main theme is what actually sustains dollar power and what could realistically alter it. Let’s get started.
Jess, fascinating background: Treasury, State, CIA, lots of different things. Now you write on geoeconomics, you author a newsletter, and you work at Column. Tell us about you.
Jess: All right, let’s go. When I was 10 years old, my mother and I were walking across the street on LaSalle in Chicago, where I’m from. I looked at this beautiful building and I said to my mom, “I’m going to work there one day.” It was the Chicago Board of Trade (CBOT). She said, “Wait, what? You said you were going to be a ballerina.” She thought I wasn’t serious about anything, but I really was. I’ve always been fascinated by money and economics, and I knew really young that this was something I was going to do. So when I turned 20, I started an internship at the CBOT and I never looked back. I fell in love with markets and currencies, and I knew I was going to spend my professional life learning as much as I possibly could about them.
I started off as an FX trader. We did a lot of trading on the screens, because I was in the markets at a time when they were transitioning from pit trading to screen trading. It was still an exciting time to be a derivatives trader. The agricultural pits were still full. The majority of derivatives trading happened in those pits, and it was so exciting to hear the roar of the crowd, literally, when trades would go. I did a lot of financial market options and futures, a lot of FX futures and options, and a little bit of commodities, but mainly financials.
After about four years, I realized I needed a deeper understanding of how markets work to be a better trader. So I left the floor, sadly. I had a fun jacket and everything, just like the movies. My badge number was HOVE, H-O-V-E, which I loved, because all traders have a little acronym for their name so you could write down who you traded with, and mine was HOVE. I still have the jacket. They don’t let you keep the badge, unfortunately. Then I started a job with the now defunct MF Global. I think we were the only US firm to collapse in the European debt crisis, so that is a real badge of something. I don’t know if it’s a badge of honor, but it’s a badge of something.
Through that position I learned a lot more about market mechanics. What drives currencies? What drives financial markets? What are the factors? Currency markets tend to have two main drivers: interest rate differentials and growth differentials. But the deeper I got in my career, the more I realized there’s something else, and that something else was national security and geoeconomics. So, having been on the floor, having studied markets and worked as an FX strategist and a bond strategist, I needed something else. I also knew I wanted to spend time in government service. I really thought I wanted to join the Air Force, but I’m afraid of flying, and that’s a prerequisite. So I didn’t, but I wanted to serve my country. How do I do this? I put in an application and joined the Agency.
That was a fascinating part of my life. I spent 13 years total in government, moving around between different organizations, and that really fulfilled that third bucket of what drives currencies. Because if it’s not growth or interest rates, it’s something else, and that something else is geoeconomics. I spent a lot of time trying to understand the nexus between national security, capital markets, and the US dollar. I really capped off that experience by working as the Treasury and OFAC attaché down in Bogotá, Colombia, because that felt like the tactical implementation of dollar power.
When we think about why the dollar is a powerful tool of coercion, it’s because we can block access to our financial markets. Working for OFAC gave me that tactical experience: how do we run an investigation, what do we target, how do we deeply understand the executive orders that give OFAC the permissions to target certain entities and individuals, and how do we understand the evolution of sanctions. I want to say it was around 2014 or 2015, Jack Lew wrote a really interesting piece in Foreign Affairs. I think it was one of the first times a US policymaker started talking about the potential for over-weaponization. That was also right around the time of the BNP Paribas penalty, $9 billion. I think it was 8.9, but everyone likes to round.
Nicolas: Jack Lew was Secretary of the Treasury back then.
Jess: Yes, a sitting Treasury Secretary writing about the potential for over-weaponization. Watching that evolution and working at OFAC really helped me understand that concept much more: how we use sanctions, why we use them, and their impacts.
Then I joined Column. After 13 years in national security, I actually thought I was going to retire at the Agency. I thought I’d stay there the rest of my life, walk out with a small celebration of donuts and coffee, and go off into the sunset somewhere in West Virginia.
Then, through Happenstance and mutual friends, I met William Hockey, the founder of Column and also the founder of Plaid. I had never heard the private sector’s national security mission articulated in such a powerful way. I thought, Column is the epicentre of national security in the financial system. William really understood that there are three major theatres of economic competition: technology, energy, and finance. Column’s entire mission is to build a better bank, and better banks are what will put us at the forefront of that financial competition mission. After just one meeting, I knew I had to do this. It felt like that extension, because when you spend so much time in national security, you still crave mission. Column’s mission was so strong that I knew this was the next step, and it felt right. So here I am, writing Hegemoney.
Marieke: Tell us the link between the two. Help us understand the link between the newsletter and the mission of Column.
Jess: Column started as an infrastructure bank, designed to empower fintechs to build on top of the US financial system. William is a strong patriot, as are the employees of Column, and the mission evolved from “How do we enable fintechs” to “How do we enable the dollar.” How do we build this bank so we can be the tip of the spear in financial competition and national security?
Our core business, the bank, is building that faster, better bank. I think 90% of all our payments are processed in under 24 hours. You can’t be competitive without efficient, fantastic technology. That’s the first piece: the infrastructure for the dollar.
The second is access. We’re a correspondent bank. Despite the many attempts to move away from correspondent banking, it’s still like gravity. I like to say the payment law of gravity is that all dollars have to be cleared on US-regulated infrastructure, and despite the changes, correspondent banking has been the mechanism that fulfils that law of gravity. Column is actively creating that access point.
The third piece is research and outreach, and that’s where Hegemoney comes in. William recognized there are a lot of ways to talk about the dollar, as you both know, since you write about it so prolifically. I love your newsletter, which is another reason I’m excited to be here. But it’s another thing to frame it for a technology audience, for policymakers, which I have a ton of experience doing, and for the financial community.
For one example, you often hear that the dollar’s reserve currency status is going away. It’s thrown around so carelessly and flippantly. But if we look at the roles of the dollar, there are multiple avenues. How do we actually diagnose dollar dominance? After many conversations with William and Sean, our editor, we sat down and said we need to create a newsletter that talks about the dollar the way we think it should be talked about. So Hegemoney is the third point of the trident in Column’s national security strategy.
Nicolas: I have two small questions to make sure our conversation is accessible to a broad audience. Can you explain more about correspondent banking? It’s a very US-specific dimension that no one in Europe really understands. We clear payments here within the European Union very fast and without all those complications. So I know correspondent banking, but can you explain what Column provides in helping with that?
Jess: That’s a great point, and I often forget that Europe has a highly integrated system. I guess we like tradition, what can I say. We inherited it from the Medicis, so we’ve got to hold on to it.
Correspondent banking is essentially when a US bank provides a dollar account for a foreign bank so they can clear payments through us. We act as a gateway to the US payment system, whether it’s ACH or Fedwire. For foreign banks to clear dollars, they need access to the Fed payment system, and the Fed does not hand that out prolifically. It’s usually US financial institutions, or banks like Deutsche that have access through their US branches or subsidiaries. Generally it’s a US firm that actually has access to what we call the Fed master account. Foreign banks don’t have that, so they need an account at a US institution.
It has been in decline. Since 2010 or so, the BIS data shows correspondent accounts have shrunk by 20 or 30%. We’ve seen alternatives pop up to fill the gap, but at the end of the day the payment law of gravity when it comes to settling dollars is that you must clear through a US-regulated financial system.
Nicolas: My other question is at a higher level. Can you define geoeconomics for us? Everyone’s vaguely familiar with geopolitics, and over the past month everyone’s starting to get interested in this new vertical, geoeconomics. Gillian Tett is writing a lot in the FT about it. How do you define it?
Jess: I think it’s the intersection between economics and politics. That sounds cliché, but if you think about almost every war ever fought, most of them are a resource struggle. When we think about competition, growth, and even collaboration and multilateralism, it still comes down to how we create prosperity, and prosperity is a function of economics. As the world shifts into a new paradigm, whatever we call it, I look forward to whoever finally names it, because it’s no longer Bretton Woods. It’s not post-Bretton Woods or the Washington Consensus. It’s a new world order. Mark Carney tried “principled & pragmatic” policy, P3, which I love. Why are we not using that? It was fantastic. But we’re not. In this new world order, relationships appear to be more transactional, and we’re no longer assuming everyone is acting in good faith.
Marieke: Fascinating. Let’s go into the depths of the topic, since you’ve already started on it. Dollar dominance. I don’t know if you can share more, but when did you actually realize, hands-on, that the dollar was a system of leverage? You alluded to it a little. I’d love it if you could walk us through that moment when you realized it’s way more than just a currency.
Jess: I love that question. When I was a derivatives trader and even an FX strategist, I thought this was a market function. Currencies tie the world together. It’s how we do trade, it’s what links us, it’s the flow of funds. But it was actually when I was at MF Global that I realized currencies are a political tool. MF Global had, it’s not a secret, a very large European debt position, which is what ended up taking the firm down. Those bonds paid out completely; they never defaulted, they were never restructured.
John Corzine was the former CEO, and we were talking about the position. I’d been pretty neutral on the euro, not bearish, only because despite the economic struggles, the ECB was not engaging in the same level of quantitative easing as the Fed. From a balance sheet perspective, it was difficult to see how the euro weakened substantially. John said something: “The euro was Europe’s answer to centuries of war.” And I thought, you’re right, absolutely. That was it for me. The euro created a binding constraint, because why would you go to war with another country that shared your currency, whose fate directly impacted the economic fate of your own country?
It was really that moment, around 2011, which tracks. I realized I was missing this entire element of understanding currency markets. Currencies are not just a tool for commerce and finance, they are a tool of leverage.
Nicolas: I’m curious. I know we’re focusing on the dollar today, but you had that direct experience of the euro and trading on European markets, confronted with a crisis in 2011 that almost brought down the euro. How do you see the euro playing out? What are the tensions within the eurozone? What’s the role of Germany? Are we making the most of it, or do we need to find something else to make the eurozone work? I know those are big questions.
Jess: Let’s talk about the euro. I’m going to say something that I feel like everybody says, but it’s important: without debt mutualization, the euro can’t advance. You can’t have monetary unity without fiscal unity. The euro has prevented Europe from going back to war. It has brought everyone to the table. But I remember during the Greek financial crisis thinking that Greece essentially had a pegged currency. It was a floating currency, yes, but when your economics don’t match those of the strongest player in the union, it’s really difficult. There’s no adjustment mechanism, and they lack the fiscal adjustment. So that should be the priority for the euro, debt mutualization, and I’m one of a million people saying this.
Beyond that, it will be interesting to see to what degree Europe pursues a euro stablecoin. What I worry about with CBDCs and stablecoins is that we create a bifurcated infrastructure, where there’s one payment system for CBDCs and one for stablecoins. Because CBDCs are reserves, they will always be valued at one. Stablecoins can go under one. When you’re settling trillions of dollars, that matters a lot. That’s going to be difficult for interoperability. They’re effectively two separate currencies, so I worry about a bifurcation.
With the United States, we’re banned from pursuing CBDCs until 2030. The executive order is very clear. We’re full throttle on stablecoins. On CBDCs, we’re not advancing that until 2030, and I believe that’s both retail and wholesale, from what the EO seems to suggest. Europe has the opportunity not to be locked out of any payment system if it pursues both options, because it’s moving quickly on a digital euro. If it also pursues stablecoins, that would preserve its access to other types of settlement and payment systems.
“My local dive bar does not let me buy beer in gold dust”
Marieke: Let’s go back to the dollar. You write a lot about the power of the dollar and the misconceptions people have, for example that it’s all about reserve currency status. Walk us through the main misunderstanding people have about the power of the dollar.
Jess: I think the main misconception I read on FinTwit, and I hate that I’m this online, I could not have imagined in my 40s that I’d be so online and getting all these memes, but here we are. When I look at how the dollar is perceived, there’s a real misguided focus on reserve status.
Why was reserve status important in 1945? Because everything was pegged to the dollar and then to gold. The system required it. Even after the fall of Bretton Woods and the collapse of the institution in 1973, we went to a series of pegged exchange rates, which made reserves even more important.
Then came the Asian financial crisis in 1998. In the period from 1973 to 1998, countries needed reserves because that’s how you intervened in your currency and how you imported goods. Every development economist knows, and you probably learned this in Macro 101, that a country needs three months of reserves to be considered stable. That’s an indicator built into so many models.
But after 1998 and the collapse of the pegged exchange rates, I’m not saying reserves aren’t important, but they’re not as necessary. We are not protecting pegged exchange rates as much as we did before 1998. So what do reserves actually signify now? There was the surge of surpluses, the savings glut from around 2005, which Ben Bernanke talked about, and Brad Setser and Maurice Obstfeld have written on this at length. Because of globalization, the surge in global trade, and the interconnectedness of commerce, we did see a rise in reserves. So what do reserves reflect in that moment? They reflect the currencies that countries were using to engage in trade. That’s an important shift: reserves became an indicator of the currency being used in everyday trade.
Let’s talk about gold. If you’ve opened an article in the last five years, you’ve seen the surge in gold holdings. Now it’s about 25% of total reserves. When we look at reserves, other assets, SDRs, gold, and foreign exchange, gold is about 25%. That’s pretty significant. Ten or fifteen years ago it was only 10%, so that’s a huge rise. But why does it not matter as much? Because it doesn’t suggest the dollar is being used significantly less as a vehicle currency. What it reflects is the movement into a different era. We’re in a different paradigm, a geoeconomic-driven paradigm, and countries are protecting themselves from potential weaponization by holding gold. But as I wrote recently, my local dive bar does not let me buy beer in gold dust. Maybe they’d figure it out, I can’t say they’d say no, but gold is not a transaction currency. Not yet. There’s talk of tokenization, but you can’t use gold transactionally at a large, meaningful scale.
So why do I bring all this up? When we think about dollar dominance, we have to look at it holistically: reserves, vehicle currency, and funding currency. That’s how we diagnose the dollar’s status. Vehicle currency, to me, is the most transactional and useful measure of dollar dominance, because it shows that countries need the dollar to engage with one another. If I want to import avocados, a significant portion of US avocados come from Mexico, and that trade is done in US dollars. It shows that in order to get the things I need, I have to use this currency. That’s why I think vehicle currency status is more important than reserves these days. Reserves tell you what countries are using for their trade; vehicle currency is what they’re actually using.
What’s also fascinating is that when I sat on the FX desk at MF Global, you could see that the spread between exotic currencies was so wide that it always made more sense to go through the dollar. FX markets have changed now: they’ve become more electronic and digitalized, and it’s become easier to access pools of liquidity, so those spreads have shrunk. But generally, if I wanted to trade Brazilian real to Indian rupee, it just makes more sense to go through the US dollar than to try to make a market between those two. So if you think of vehicle currency as a two-pronged spear, the first prong is the currency you and I use to transact, and the second is the currency I use to drive from one currency to the next. Those are powerful and sticky.
Finally, on funding currency, our markets are enormous compared to other financial markets. They’re not comparable. Especially without mutualization in Europe, an Italian sovereign bond is very different from a German, Belgian, or Spanish one. The funding currency angle is really interesting because it shows people are willing to fund their businesses and financing needs in US dollars. So those are the three tools we need when we look at not why the dollar is dominant, but where the dollar is dominant. Because why the dollar is dominant is a very different story.
“We need an offensive dollar strategy”
Nicolas: What about sanctions? You know that space well, having been a practitioner in the US government.
Let me make a quick detour first. I used to say that when Trump was re-elected in 2024 and made it clear he intended to impose tariffs and wage trade wars on various partners, including allies, it forced us to dust off our macroeconomics textbooks. I learned macroeconomics at Sciences Po 25 years ago and never used it professionally until last year, when suddenly everyone was talking macroeconomics. When you revisit macroeconomics, you also revisit the events that led us to this paradigm shift you’re alluding to.
A key turning point seems to be 2014, when Russia invaded Crimea and the US responded with sanctions. Those sanctions were traumatic from a Chinese perspective, because the Chinese realized, if they do this to Russia today, maybe they can do it to us tomorrow. So they’d better work on making their economy, currency, reserves, and banking system immune to US sanctions.
How do you balance the two? Countries like China want to become more immune to US sanctions, but still everyone wants to use dollars for everyday trading because it’s so efficient and convenient. Paul Krugman made the comparison, quoting someone else [Charles Kindleberger], that when a French speaker and a Spanish speaker who don’t know each other’s language meet, they discuss in English. That’s the lingua franca that makes it possible for everyone to interact, and the dollar is the same.
So how do you balance the two? Are there tensions at the moment? Are there counterparties that refrain from using the dollar because there’s macro or systemic pressure from government authorities who want to avoid exposure to sanctions?
Jess: I love this question, and I want to circle back to the first thing you said, because 2014 is such an underappreciated date.
