>Britain too was
>then a recipient of large net inflows on both capital and current
>accounts, ran a permanent balance of payments deficit, and was a net
>debtor: and this has to be so, for if the hegemonic power is not
>purchasing imported goods and services with its paper money, then how
>can other countries accumulate its currency in the first place? Only a
>hegemonic debtor can become a source of international reserves.
Mark, I disagree completely.
Isn't it true that Britain emerged in 1815 as the main capital exporter of the world
and as a creditor? Britain, 1851-1900: exports-imports=583 mio.� BUT
"sevices"=502 mio.� and "dividends"=397 mio.� (calculated - not by me - from
Peter Mathias,1969)... I admit an error margin and abusive aggregation but
still... you're forgetting the Empire or what? Aren't there estimates of 1900
foreign holdings above 2 trillions �? Saul estimated them at more than 3,75
trillions � in 1913 (this is outdated and probably overestimated but it's the only
one I've at hand).
I will not try to describe the prewar world in more detail or else I'm going to be
accused of debating irrelevant historical details or something of the sort. So,
let's talk with the dollar hegemony: The US capital market used to be
dependent on London and the USA was indebted. The sterling was the main
currency of the world. Then comes a few wars, crisis, and more intensive
industrialization. The dollar becomes the main currency of the world. During
that time the USA position reversed from a debtor to a creditor. So it seems
that one can very well be a hegemonic creditor and have it's currency
be used as a reserve currency. Look at the US international postition: It went
from beign a creditor to neutral around 1970 and then became a debtor only
during the 1980s. I encourage everyone who haven't done so to look at a chart
of this evolution, because it's really striking how deep and quicly the USA
became indebted these last 20 years
(http://www.panix.com/~dhenwood/USForDebt.html).
You rightly ask how can other countries accumulate the currency then? Look at
the "pr�t-bail" (how's that in English already?), the Marshall plan, etc. One can
lend one's currency to the rest of the world and then later cash in the profits for
a few decades. In fact, I think that you are not looking at the issue from the
good standpoint. The relation of credit doesn't even have to be made with the
currency of the lender or the debtor. It's the hegemonic currency which
determines in which currency the loans are going to be labelled in the first
place. Debtor countries ask for the hegemonic currency to make purchases.
So I think you are reversing the causality.
BTW, what the hell does "net inflows on both capital and current accounts"
mean??? Is this a trick with where gold flows are accounted in the balance?
>This
>is one reason why the euro caould not become and international reserve
>currency any more than the yen or the D-Mark could; because Germany
>and Japan are traditionally balance of payments surplus countries,
>trading goods and servcies for dollars.
If the yen or the D-Mark didn't become reserve currency (well, they did to
some extent) it's because their currencies are not hegemonic. What's this talk
about tradition, Mark? They could easily become BoP deficit countries as they
have been in the past (unlike the USA today they controlled the deficits, but the
deficits were still there). BTW, the German current account has been in slight
deficit for most of the last decade if I'm not mistakes. If their currencies are not
used a lot as reserves, a good reason is that they are strong (in other words
their central bankers did not allow their banks to flood the world with paper) but
a more important one is the one you talk about lower.
Anyway, it's so easy for central banks to simply swap their currencies that it's
not really a problem as far as reserves are concerned. Currencies virtually
unused on the world markets could very well be the main reserve currencies.
The question is: would a huge amount of such a currency be useful as a
reserve? My answer is that in certain conditions it could be more useful than
the hegemonic currency. As you suggest lower, buying dollars for reserves
was a heavily politically motivated.
>What *they* hope is that by
>this means they will perhaps one day be able to reverse the verdict of
>history in the World War 2, and by accumulating vast US debt, get a
>stranglehold on the US economy and eventually destroy all its
>competitive advantages. They have come close to doing this several
>times, notably in the early 1970s, but have now surely lost the battle
>decisively (once the US won the Cold War, it was easily able to
>destroy all competitive advantages of Germany and Japan, and has done
>so).
Well, well... You assume capitalists are trying to further their country's
interests instead of simply following commercial logic? You asssume that
Japan and German governments don't behave as pets of the White House
anyway?
What the hell does "competitive advantage" between industrialized
economies mean anyway? I know about over- and under-valued currencies,
about capital flows altering the balance of trade etc. but here I'm lost.
How is the USA now able to destroy the "competitive advantage" of Germany
and Japan, whatever it is?
And would you care to tell us more about that 1970s episode?
>Precisely because it is 'lender of last resort' and its curency is the
>principal international means of payment.
This is no explanation. *How* does the US use its advantage, whatever it is, to
control its currency better than other countries? And where do you see this
"lender of last resort" property of the USA?
>Nota bene: only since the
>collapse of communism, have the great capitalist states finally
>abandoned gold as a reserve medium. The reasons for extensive Central
>Bank gold sales do not get as much attention as they should: it is a
>sure sign of final and complete capitulation of Germany-led Europe and
>Japan-led Asia to US hegemony in the guise of the 'new global
>economy'. Since they have surrenedered monetary sovereignty, they no
>longer need gold and are content to hoard paper dollars, knowing full
>well that a dollar crisis and dollar devaluation is simply inevitable.
Great point! You have a more precise chronology about the abandonment of
gold somewhere? But can you tell me when did they consciously surrender
and why? I understand that in a way they did, but was it conscious as opposed
to a reaction to the fall in the price of gold or something?
BTW, does someone have the data on the compostition of reserves for the
world?
>This is paradoxical but true: it means that the criminals understand
>that they must either hang together or hang separately. This is the
>essence of neoliberal globalism as a strategy for continues domination
>of the West under US tutelage.
And IMO this is why the dollar continues to be hegemonic DESPITE US
indebtment. Oil also has a role, eventhough I suspect that the military control
leading to this political situation is more important than the fact that barells are
priced in dollars.
>I think the opposite is true.
Then what is wrong in my logic (more dollars overseas --> less mastery of the
US on the value of the dollar to be concise)?
>The US is the unchallenged hegemon, and
>its ability to make other states accept its potentially-worthless
>paper money in exchange for their real goods and real services, is an
>index of US power. As Rob Schaap pointed out, the rest of the world
>finances the US boom to the tune of $1.5 bn per day.
The trouble is... is the amount of paper currency accepted important? I already
challenged you to come up with alternative statistics to the mainstream ones.
The mainstream ones show if I remember well that while the amounts of dollar
outstanding is huge, the flow is not enough to finance the deficit by not only a
margin but an order of magnitude. Which is why the USA gets indebted
internationally, BTW. See, what the USA gets to be accepted is not paper
money but paper assets (private not govt. sector).
>I hope Rob will add his insights to this.
I hope too, of course.
Julien
P.S.: Just thought about this: On parralels between British and US hegemony,
there's a little paper from an Indian economist there (I did not read it yet, it's on
my long reading list):
http://fp.chasque.net:8081/ngonet/trade/news/previous/102.eng1GLOB.html
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