The Fallacy of the Revised Bretton Woods Hypothesis: Why TodayÕs International Financial System Is Unsustainable

Thomas Palley

Economics Public Policy Brief Archive from Levy Economics Institute

Abstract: The stability of the international financial system is in doubt. Analysis of the system has focused mainly on the sustainability of financing the U.S. trade deficit and has failed to understand the microeconomics of transactions within the system. According to this brief by Thomas I. Palley, the international financial system is unsustainable for reasons of demand, not supply. He recommends a global system of managed exchange rates to replace the current system before it crashes, along with the U.S. economy. East Asian economies are pursuing export-led growth and running huge trade surpluses with the United States by actively pursuing policies aimed at maintaining undervalued exchange rates. Their governments continue to accumulate U.S. financial assets in order to support and stabilize the international financial system.While East Asian policymakers are correct in their belief that they can improve economic outcomes through exchange rate intervention, the system is undermining the structure of income and aggregate demand and eroding U.S. manufacturing capacity.

Date: 2006-06
New Economics Papers: this item is included in nep-cba, nep-fmk, nep-ifn, nep-pke and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.levyinstitute.org/pubs/ppb_85.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lev:levppb:ppb_85

Access Statistics for this paper

More papers in Economics Public Policy Brief Archive from Levy Economics Institute
Bibliographic data for series maintained by Elizabeth Dunn ( this e-mail address is bad, please contact ).