|
Edited on Tue Aug-05-03 07:31 PM by DrPepper
It's a new book by Richard Duncan. Its thesis is that the defacto dollar standard, created after the fall of Bretton Woods, is causing worldwide economic dis-equillibrium which threatens to propel the world into serious recession or worse.
Under the Bretton Woods standard and previous gold standards, there were automatic mechanisms to deal with trade imbalances. These controls no longer exist and the USA is running a very large current account deficit.
The book argues the incredible growth of the world's dollar supply following Bretton Woods' collapse has caused myriad credit bubbles (South America in the 1970s, Japan in the 1980s, etc). It also argues the stock market bubble of the late 1990s in the USA and current property market bubble are an indirect result of this current account deficit and the balooning dollar supply.
In order to keep their currencies' values depressed, Asian countries must funnel dollars received from export sales back into dollar-denominated investments. If they don't do this, their currencies will appreciate and ability to export reduced. So, they have invested in American equities, corporate debt, govermment debt, and other instruments. This helped fuel the bubbles in the USA.
The author believes a crash or serious depreciation of the dollar is inevitable. To help make the system more stable for the future, he recommends a world-wide minimum wage and more monetary oversight by a global body, such as the IMF.
I tend to agree with his analysis of the problem and likely continued depreciation of the dollar. But, I'm no fan of the IMF and most of his solutions seem politically impossible at least until there is an absolute crisis.
|