Economia
McKinnon argues that US monetary policy has been highly insular, despite globalisation making such insularity obsolete, and that three macroeconomic fallacies were responsible - the Phillips curve fallacy; the efficient market fallacy; and, the exchange rate and trade balance fallacy.
In the 1960s, the US belief in the Phillips Curve - that higher inflation generated lower unemployment - resulted in the US pushing the Europeans and Japanese to appreciate their currencies. When they refused, Richard Nixon broke the link with gold in 1971. In the Alan Greenspan era (1987-2008), there was a strong belief in efficient markets, which encouraged global foreign exchange liberalisation, despite high volatility. But the most enduring fallacy is the belief that the exchange rate's role is to correct trade imbalance, hence the Japan-bashing in the 1980s and the China-bashing now to push for their exchange rates to appreciate, to reduce the US trade deficit. McKinnon considers the third fallacy the most pernicious conceptual barrier to a more internationalist and stable US monetary policy.
The central thesis of this book is that the US should recognise that the dollar standard is actually a global standard, with privileges and responsibilities. Dollar depreciation is not to America's advantage, because it would only lead to future inflation. Instead, the US should concentrate on improving its competitiveness and manufacturing prowess. This requires having positive real interest rates.
The logic of the McKinnon thesis is irrefutable, although his US colleagues may find the conclusions unpalatable. The logic is that whoever maintains the dominant currency standard must maintain strong self-discipline; the benchmark standard cannot be on shifting sands. If the dollar is weak because the US economy is weak, then all other currencies will be volatile, because they float around an unsteady standard. For small, open economies that maintain large trade with the US, having a dollar peg requires them to keep their economies flexible and they must maintain fiscal and monetary discipline. This is Hong Kong's experience.
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Economia
O padrão do dólar
Our Dollar, Your Problem
In his new book, The Unloved Dollar Standard: From Bretton Woods to the Rise of China, McKinnon explains some uncomfortable truths. The dollar standard is unloved because of what one US Treasury secretary told his foreign critics of US exchange rate policy - "our dollar, your problem."McKinnon argues that US monetary policy has been highly insular, despite globalisation making such insularity obsolete, and that three macroeconomic fallacies were responsible - the Phillips curve fallacy; the efficient market fallacy; and, the exchange rate and trade balance fallacy.
In the 1960s, the US belief in the Phillips Curve - that higher inflation generated lower unemployment - resulted in the US pushing the Europeans and Japanese to appreciate their currencies. When they refused, Richard Nixon broke the link with gold in 1971. In the Alan Greenspan era (1987-2008), there was a strong belief in efficient markets, which encouraged global foreign exchange liberalisation, despite high volatility. But the most enduring fallacy is the belief that the exchange rate's role is to correct trade imbalance, hence the Japan-bashing in the 1980s and the China-bashing now to push for their exchange rates to appreciate, to reduce the US trade deficit. McKinnon considers the third fallacy the most pernicious conceptual barrier to a more internationalist and stable US monetary policy.
The central thesis of this book is that the US should recognise that the dollar standard is actually a global standard, with privileges and responsibilities. Dollar depreciation is not to America's advantage, because it would only lead to future inflation. Instead, the US should concentrate on improving its competitiveness and manufacturing prowess. This requires having positive real interest rates.
The logic of the McKinnon thesis is irrefutable, although his US colleagues may find the conclusions unpalatable. The logic is that whoever maintains the dominant currency standard must maintain strong self-discipline; the benchmark standard cannot be on shifting sands. If the dollar is weak because the US economy is weak, then all other currencies will be volatile, because they float around an unsteady standard. For small, open economies that maintain large trade with the US, having a dollar peg requires them to keep their economies flexible and they must maintain fiscal and monetary discipline. This is Hong Kong's experience.
Mais
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- Mais Zeitgeist
Chega até a ser engraçado... Of DOW JONES NEWSWIRES SHANGHAI (Dow Jones)--A relatively weak U.S. dollar has been hurting Brazil's economy, and a potential Chinese yuan revaluation against the dollar could help stabilize global currencies, Brazilian...
- Brazil's Economy.
INFLATION is at 6.3% and is poised to break through the ceiling of the Central Bank’s target of 2.5-6.5% for the first time since it was adopted in 2006. That is despite the currency surging to 1.58 reais to the dollar, close to its peak since it was...
- China No Caminho De Padrão Ouro
China continues to hoard gold en masse. In June, China imported 104.6 tonnes from Hong Kong. That would bring China's gold imports from Hong Kong to 1,160 tonnes since the beginning of this year. Officially, China reports its total gold holdings...
- Sobre- E Subvalorização Das Taxas De Câmbio Em Termos De Poder De Compra E Renda
THE Economist’s Big Mac index is a fun guide to whether currencies are at their “correct” level. It is based on the theory of purchasing-power parity (PPP), the notion that in the long run exchange rates should move towards the rate that would equalise...
- Estados Unidos E China Em Comparação
We invite you to predict when China will overtake America AMERICA'S GDP is still roughly twice as big as China’s (using market exchange rates). To predict when the gap might be closed, The Economist has updated its interactive chart below with...