Introduction and summary

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Chapter 1 in All Fall Down, 2018, pp 1-18 from Edward Elgar Publishing

Abstract: The global economy has been shaped by the US dollar’s role as key currency. Other countries rely on export-led growth to earn the dollars they need for cross-border transactions. The resulting US trade deficits are financed by foreign investments in dollar assets that have raised US net debt to the rest of the world to historically high levels relative to GDP. Credit generated by foreign savings also created historically high levels of domestic debt that were an underlying cause of the financial crisis of 2008. The unregulated offshore market compounded the problem by forcing deregulation on national markets and eroding the ability of the US central bank to control the credit supply and prevent the debt bubble. Since the key currency system depends on confidence in US economic strength and growth, ongoing US dependence on foreign savings and debt-fed growth will weaken its economy and undermine confidence in the dollar.

Keywords: Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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