Posted on 02/10/2014 8:30:23 AM PST by SeekAndFind
Chronic problems have been flaring up in financial markets lately, and some of them may emanate from the United States. Yet none of these issues have seriously damaged the exalted status of what Washington Irving once called “the almighty dollar.”
In fact, a familiar pattern has been emerging: When the world’s financial system runs into trouble, the position of the dollar as the world’s crucial currency becomes more formidable.
Eswar S. Prasad, a Cornell economics professor and senior fellow at the Brookings Institution, has written a thoughtful new book that clarifies this counterintuitive phenomenon. Its title is “The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance” (Princeton University Press).
In a conversation last week, Professor Prasad, formerly the head of the financial studies and China divisions of the International Monetary Fund, said: “There’s a dollar paradox. You might think that after the global financial crisis — after the world experienced so much financial turmoil because of U.S. policy actions — that the dollar would be losing some of its importance. But the truth is the opposite of that. We’re seeing this today as emerging markets run into trouble. It’s just making the dollar stronger.”
It’s not that the dollar is universally viewed as an ideal linchpin for global finance, or that other countries believe that the United States should enjoy the “exorbitant privilege” of minting the world’s money. That’s what Valéry Giscard d’Estaing called it when he was French finance minister in the 1960s. Mr. d’Estaing and Charles de Gaulle, the French president, sought unsuccessfully to reduce the dollar’s clout.
(Excerpt) Read more at nytimes.com ...
That’s great! (But, mass delusions eventually do correct themselves....)
More support for my theory that since we’re all basically in the same sinking boat, the global elites will be able to spin out this game of Three Card Monte for a LOOOOOOONG time.
It’s not all that hard for importers and bureaucrats to aid enemies in mercantilism and currency wars against the U.S.A. Continued betrayals suffice.
I believe both Deflation and Inflation are coming. Both will cause the average American the most pain as possible.
I agree. Big ticket items like homes and luxury goods will probably deflate and commodities like gas, electricity, food, will go UP.
I admit I know very little about “high finance,” but isn’t
a currency tied to its people? In other words, doesn’t the global financial community support the dollar because they have an abiding faith and instinctual belief in the power and strength of American productivity?
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