The Fallacy of the Revised Bretton Woods Hypothesis

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Chapter 4 in Neoliberalism and the Road to Inequality and Stagnation, 2021, pp 49-65 from Edward Elgar Publishing

Abstract: The Revised Bretton Woods hypothesis was a popular explanation of global economic developments in the 2000s, including the large U.S. trade deficits. The argument was that the international financial system had structural similarities with the earlier Bretton Woods (1946 - 71) arrangements, whereby the U.S. ran large trade deficits that provided financial assets which greased and encouraged global economic growth. This chapter challenged that view and argued the system was actually headed for a crash (as happened soon after in 2008). The reasoning was simple. The U.S. boom and U.S. demand for imports were built on household debt. When household borrowing eventually faltered owing to either debt limits or self-imposed unwillingness to take on more debt, the system would crash, pulling down both the U.S. economy and the global economy.

Keywords: Business and Management; Economics and Finance; Politics and Public Policy (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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