[Marxism] [Pen-l] Michael Hudson: The game is over

Jim Devine jdevine03 at gmail.com
Sat Jun 21 08:17:35 MDT 2008


> Michael Hudson: The United States always has steered its monetary policy
> almost exclusively with domestic objectives in mind. This means ignoring the
> balance of payments. Like the domestic U.S. economy itself, the global
> financial system also is all about getting a free lunch. When Europe and
> Asia receive excess dollars, these are turned over to their central banks,
> which have little alternative but to recycle these back to the United States
> by buying U.S. Treasury bonds. Foreign governments – and their taxpayers –
> are thus financing the domestic U.S. federal budget deficit, which itself
> stems largely from the war in Iraq that most foreign voters oppose.
>
> Supporting the dollar's exchange rate by the traditional method of raising
> interest rates would have a very negative effect on the stock and bond
> markets – and on the mortgage market. This would lead foreign investors to
> sell U.S. securities, and likely would end up hurting more than helping the
> U.S. balance of payments and hence the dollar's exchange rate.
>
>  So Bernanke is merely being polite in not rubbing the faces of European and
> Asian governments in the fact that unless they are willing to make a
> structural break and change the world monetary system radically, they will
> remain powerless to avoid giving the United States a free ride – including a
> free ride for its military spending and war in the Near East.

why does the Fed have to support the dollar exchange rate? Why not
simply enjoy an export surge?

-- 
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
way and let people talk.) -- Karl, paraphrasing Dante.




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