[Marxism] Why is world economy more dollar-centered despite hugetrade, govt deficits (and euro)

robert montgomery ilyenkova at gmail.com
Sun Dec 3 16:06:00 MST 2006


Marvin Gandall wrote:
>>The relationship has a parallel distorting effect on the US economy, as
mainstream economists have noted, in that it has artificially kept interest
rates low and the dollar high, spurring a debt-financed import boom and
current account deficit which now threatens both the solvency of US
consumers and international confidence in the dollar.<<

Yes this is an important point. As pressure mounts on the USD, the PRC
Central Bank has been doing a balancing act between moving some of its
reserves out of the dollar while being careful not to increase
downward pressure on the $ that would devalue its own dollar holdings
and force US interest rates up. Also, while Henry C.K. Liu is right
about the overall effects of dollar dependancy on the economy of the
PRC (which was why I posted the excerpt) I think the PRC managers are
more proactive than he does. I think they're quite aware of  the drain
of the PRC surplus, and have been aggressively seeking offshore
investment outlets for non-speculative capital investment. I don't
have figures but I do hear that the PRC capital is bidding for
infrastructural projects globally. The point here I guess is  that the
overall relationship is still one of dollar hegemony, but that those
at highest risk within this system, like the PRC, do look out for
themselves while being careful not to kill the golden (er, dollar)
calf in the process. It's a precarious process though, as long as the
US continues on its present trajectory of double deficits. I suspect
we'll see some change here. But then I thought Kerry would win in '04.




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