Tuesday, November 11, 2003

Richard Duncan - Bretton Woods - Global Imbalances

Is global deflation creating a real global credit trap? Are we in a catch-22 debt trap of globalization's failed Bretton Woods System? If so, where do we go from here? I think it is high time for a real global discussion by the powers that be to take this issue seriously and do something, fast. The real global imbalances will require a complete rethinking and total reform of the disastrous state of present globalization - Now! We need to restore sustainable growth and demand - globally!

PrudentBear.com Interviews Richard Duncan

Richard Duncan is author of a new book called "The Dollar Crisis: Causes, Consequences, Cures." In it, he argues that the Japanese bubble, the Asian Crisis and the U.S. bubble are related. In Mr. Duncan’s view, problems have been building since the U.S. ditched the Bretton Woods system for what turned out to be a "dollar standard." As Richard will explain, the U.S. has benefited from the dollar standard because the U.S. is allowed to play by different rules. It appears, however, that we've overplayed our hand. But before we find out why Mr. Duncan thinks that a "dollar crisis" is inevitable, let's learn how we got here.

PRUDENTBEAR.COM: Before we find out where we are, can you help us find out where we've been by filling us in on Bretton Woods? For example, under Bretton Woods, what happens when a country imports more than it exports?

RICHARD DUNCAN: To see what has gone wrong with the global financial architecture, it’s first necessary to understand that the global economy functions very differently today than it did before the Bretton Woods System collapsed in the early 1970s. Today, the United States’ Current Account Deficit is 60 million Dollars…AN HOUR. A Million Dollars a minute, if you will. Or roughly 17 thousand Dollars a second. Let’s call it HALF A TRILLION DOLLARS A YEAR.

That’s the amount by which the United States is subsidizing the rest of the world’s economy each year. AND, that’s the amount by which the United States’ net debt to the rest of the world is increasing each year. It’s also the amount by which international reserves—and the Global Money Supply—are expanding each year since the increase in international reserves is more or less determined by the size of the annual US Current Account deficit. ...Interview Continued

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