productivity growth in, 31f
Fiorino, Florentine, 5–6
Fiscal balance, as policy tool, 133, 134
Fiscal policy:
of Europe, 59
in eurozone, 60–63, 156–158
monetary policy vs., xx
Florence, Italy, 5–6
Florentine fiorino, 5–6
Foreign currencies:
deflation against the dollar, 65, 67
world’s largest holders of, xii
Foreign currency reserves:
of China, 53, 226–227
of top five reserve currency issuers, 76
Foreign direct investment (FDI), 102–103, 118f
Foreign exchange (forex) market, xix–xx, 223–224
central banks in, xx–xxii
and currency relationships, 128
“Triennial Central Bank Survey” on, 80
Foreign exchange reserves:
composition of, 101f, 116, 117f
in dollars, 2, 2f
in euros, 116
Foreign exchange valuations (of countries), 128
Foreign official reserves:
held by central banks, 84–86
liquidity and investment tranches of, 85–86
Forex (see Foreign exchange market)
Franc (see French franc; Swiss franc)
France:
and currency war of 1930s, xiii
debt as percent of GDP, 55
in EMU, 98
and euro interest rates, 60
and eurozone integration, 10, 63
fertility rate in, 43f
in G-20, 190
GDP per hour worked in, 33f
government expenditures in, 140f
labor costs in, 59
life expectancy in, 44f
net debt outstanding, 23f
and Plaza Accord, xxi–xxii
presidency of G-20 Group, 78
productivity growth in, 18, 18f, 31f, 32
sovereign debt of, 9
Free markets:
benefits of, 62
and monetary policy, 218
self-regulating nature of, 12
and success as international currency, 22
and the U.S. dollar, 45–48, 47f
Free-floating currencies, xviii–xix, 93, 209
French banks, 9
French franc:
official reserves held in, 82, 82f
as reserve currency, 114, 131f
Friedman, Milton, 126
Fukuyama, Francis, 125–126
G
G-5 finance ministers, currency management by, xxi–xxii
G-7:
factors in GDP growth, 164, 164f
fertility rates, 43f
GDP per hour worked in, 33f
productivity growth in, 31f
(See also individual countries)
G-20 Group:
and China’s currency peg, 225
and IMF, 192, 194–195
and international monetary system reform, 115
rise of, 190–192
summit of 2009, xi, 189–190
Gadhafi, Muammar, 25
GDP:
of China, 36, 37, 40–41, 40f, 51f, 173, 174f, 221
by country, 1869-1913, 18, 18f, 19
debt as percentage of, 55
Dutch, 13
of emerging-market economies, 120
English, 13
of eurozone, 7, 9
per hour worked, 32, 33f
and reserve currency status, 74
of the United States, 4, 35–37, 221
Geithner, Timothy, 219
German bonds, 104f
German (deutsche) mark, 100, 205
devaluation of U.S. dollar against, xxi
official reserves held in, 82, 82f
as reserve currency, 83, 114, 131f
Germany:
cartels in, 62
country banks of, 9
debt as percent of GDP, 55
in EMU, 98
and euro interest rates, 60
and eurozone integration, 10
eurozone power of, 63
fertility rate in, 43f
and fiscal compact, 157–158
in G-20, 190
GDP per hour worked in, 32, 33f
government expenditures in, 140f
immigration to, 61
inflation rates, 99
labor costs in, 59
life expectancy in, 44f
market share of economy, 167f
net debt outstanding, 23f
and Plaza Accord, xxi–xxii
productivity growth in, 18, 18f, 31f, 32
productivity in, 19
suspension of gold standard in, 205
Global economy (see World economy)
currency, 219–220
macroeconomic, 110
Global monetary system:
need for new reserve system, xiv
role of the United States in, xii–xiii
GNP, real (U.S.), 17–18
Gold, 201–218
advantages of, 24–26, 25f, 26f
and Bretton Woods Agreement, 208–209
convertibility of dollars into, 188
drawbacks of, 27–29, 28f
experts opinions on the role of, xiv–xv
exploration for, 203
factors in worth/price of, 26, 210–211
and fiat currency regime, 209–210
during Great Depression, 206–207
historical uses of, 201–203
as nineteenth century reserve, 6
paper money backed by, xvii (See also Gold standard)
price of, 26–28, 28f, 210–211
as protection, 217
and suspension of gold standard, 204–208, 211–216, 213f–216f, 218
Gold Reserve Act of 1934, 206
Gold standard, xvii, xviii
and fiat currency regime, 209–210
and Great Depression, 7, 206–207
in managing currency relationships, 128–129
monetary policy with, 28–29
and monetary system stability, 187
suspension of, 204–208, 211–216, 213f–216f, 218
in the United Kingdom, 24
in the United States, 7, 28, 188, 192, 205–207
Goods and services deflation, 67
Governments:
massive debt of, xi
stimulus spending by, xi–xii
and weak home currency, xxi
Grant, James, 206
Grayson, C. Jackson, Jr., 10–11, 13
Great Depression, xiii
and gold standard, 7, 206–207
productivity growth during, 34
studies of, 126
Great Recession (2007-2009), 8, 50, 51, 51f
Great Society, 34, 35
Greece:
ancient currency of, 5
bailout of, 8, 147–148
debt-to-GDP ratio, 103, 147
and euro interest rates, 60
and eurozone crisis, 9, 103
GDP per hour worked in, 33f
and Germany, 63
government expenditures in, 140f
labor costs in, 59
net debt outstanding, 23f
political society of, 132
potential default of, 9
potential exit from eurozone, 146–149
productivity growth in, 31f, 32
Greene, Megan, v–vi
Greenspan, Alan, 211
Gross domestic product (see GDP)
Guilder (see Dutch guilder)
H
Heads of State and Government (eurozone), 95, 98, 105
Healthcare reforms, for China, 42, 177
Hedge funds, forex trades of, xix
Hegemonic reserve currency, 73–89
challenges to Chinese yuan as, 86–89
increasing enfeeblement of, 129–130
and size of the economy, 74–76
U.S. dollar as, 112
and central banks’ holdings of dollars, 84–86
and incumbency advantage, 76–80, 79f
and previous writing off of U.S. dollar, 80–84, 82f
Hungary:
GDP per hour worked in, 33f
productivity growth in, 30, 31f
I
Iceland:
GDP per hour worked in, 33f
IMF bailout of, 137
productivity growth in, 31f
IMF (see International Monetary Fund)
Immigration:
in eurozone, 61
to Japan, 42, 43
to United States, 43
Income deflation, 65, 66f
Income inequality, 216, 222–223
India:
future role of, 120
in G-20, 190
GDP of, 37f, 120
in global economic decisions, xii
money pouring into, xiii
Indonesia, export value added in GDP, 166f
Industrial policy, future of the euro and, 139–140, 140f
Industrial Revolution, 6, 13–14, 48, 128
Inflation rates, 212
and currency wars, 189
and the euro, 99–100
in Germany, 99
hyperinflation, 205–206
in the United States, 100, 210
Input costs, in China, 180
Institutional crisis management (EU), 108–109
Interest rates, 88
in China, 46, 88
and declining dollar, 68
euro, 60
in Japan, 54
lowering, xx
as policy tool, 133, 134
setting of, 211
and U.S. national debt, 224
International Bank for Reconstruction and Development, xviii
International capital flows:
in Europe, 92
and international trade, 79–80
International Monetary Fund (IMF):
COFER data of, 81
creation of, xviii
and future of eurozone, 146
and G-20, 192, 194–195
growing role for, 192–195
on integration in Europe, 63
purpose of, xviii
on replacement of dollar as reserve currency, xv
SDRs of, 115, 197–199
International monetary system:
Bretton Woods rules for, xiv
currency wars, 187–192
dollar-denominated, 78
gold standard, xvii–xviii
history of, 187–188
most salient future developments, 195–197
and new reserve currencies, 195–197
new SDR standard for, 198–199
reform of, 110–111, 115
and reinvention of IMF, 192–195
stability of, 116, 117
International trade:
basic questions of, 128
by China, 164–166, 164f, 166f, 167f, 175
within eurozone, 102
and international capital flows, 79–80, 79f
International trade and reserve currency:
gold as, 27
history of factors affecting, 5–10
and military might, 20–21
necessary ingredients for, 21–24, 23f
need for, 24–30, 25f, 26f, 28f, 30f
single vs. dual, 29–30
U.S. dollar as, 30–71
and credibility, 63–70, 65f, 66f
and depth and breadth of markets, 44, 45f
and economic size, 36–44, 37f, 38f, 40f, 41f, 43f, 44f
and free and open markets, 45–48, 47f
and lack of substitutes, 48–63, 51f, 54f–58f
and productivity growth, 30–36, 31f, 33f–35f
(See also Reserve currency)
Investment:
in China, 40f, 45–47, 167–170, 168f–170f, 222, 228
in eurozone, 60
Investment banks, forex trades of, xix
Investment tranche, 85–86
Invisible hand, 12
Ireland:
debt-to-GDP ratio, 103
in EMU, 98
and euro interest rates, 60
and eurozone crisis, 9
GDP per hour worked in, 33f
government expenditures in, 140f
labor costs in, 59
life expectancy in, 44f
net debt outstanding, 23f
potential exit from eurozone, 150–151
productivity growth in, 31f, 32
wage cuts in, 60
Israel:
GDP per hour worked in, 33f
life expectancy in, 44f
productivity growth in, 31f
Italy, 22
bailout of, 8
debt as percent of GDP, 55
in EMU, 98
and eurozone crisis, 9
fertility rate in, 43f
future of, 151–155
in G-20, 190
GDP per hour worked in, 33f
government expenditures in, 140f
labor costs in, 59
net debt outstanding, 23f
political society of, 133
productivity growth in, 31f, 32
J
Japan:
10-year government bond yields, 58f
and criteria for hegemonic reserve currency, 75
debt as percent of GDP, 55
deficit spending in, 54, 56
equity market capitalization, 23f
export value added in GDP, 166f
exports/trade balance, 56, 57f
fertility rate in, 42, 43f, 44
in G-20, 190
GDP of, 32, 33f, 34, 37f
government bondholders in, 45f
immigration to, 42, 43
life expectancy in, 43, 44f
market share of economy, 167f
net debt outstanding, 23f
and Plaza Accord, xxi–xxii
post-World War II productivity in, 20
productivity growth in, 18, 18f, 19, 31f, 32
ratio of working-age to older population in, 39, 43
recent inflation in, 212
saving rate in, 56, 56f
social welfare system in, 56
stock market capitalization in, 44
trade relations with the U.S., xxi–xxii
Japanese yen:
devaluation of U.S. dollar against, xxi, xxii
foreign exchange reserves, 101f
international market share of, 69
official reserves held in, 82, 82f
as reserve currency, 83, 131f
share of global currency reserves, 117f
as substitute for the U.S. dollar, 54–58, 54f–58f
Jen, Stephen, vi
Johnson, Robert, vi
K
Keynes, John Maynard, 207–208
Kindleberger, Charles, 126
Korea:
export value added in GDP, 166f
GDP per hour worked in, 33f
market share of economy, 167f
productivity growth in, 31f
(See also South Korea)
L
La Cassa per il Mezzogiorno, 133
Labor costs:
in China, 70, 184–185
in eurozone, 59, 61
Lack of substitutes:
and success as international currency, 24
for the U.S. dollar, 48–63, 51f, 54f–58f
euro, 58–63
yen, 54–58, 54f–58f
yuan, 49–53
Lee Myung-bak, 226
Life expectancy, 43, 44f
Lipsky, John, 78
Liquidity tranche, 85–86
Long-term debt cycle, 136
Luxembourg:
in EMU, 98
GDP per hour worked in, 32, 33f
government expenditures in, 139, 140f
productivity growth in, 31f
M
Maastricht Treaty, 95–97,
134
Macroeconomic imbalances, 110
Malaysia:
China’s foreign exchange settlement arrangements with, 78n.4
share of export value added in GDP, 166f
Malta, political society of, 132
Managed floating exchange rate, in China, 52–53
Mantega, Guido, 189
Manufacturing, 59, 70, 223
Marco Polo, 11
Mark (see German (deutsche) mark)
McDonald’s, 78n.4
McKinley, William, 27
Merkel, Angela, 148, 154
Metternich, Klemens von, 142
Mexico:
GDP per hour worked in, 33f
gold bought by, 214
productivity growth in, 31f
Middle class:
for China, 221
and robustness of economies, 14–15, 216
in the United States, 223
Middle Eastern countries, reserves of, 29, 30
Military power, and international trade and reserve currencies, 20–21
Minsky, Hyman, 126, 136
Monetary policy:
basic consensus on, 123
European, 91–92
in EMI third stage, 98
in EMU first stage, 95, 96
in eurozone, 62–63
Fed’s regulation of, xx, 52
fiscal policy vs., xx
with gold standard, 28–29
of hegemon, 130
of Japan, 54
of United States, xx, 114
without gold standard, 211–212
Money supply, as policy tool, 133, 134
Monnet, Jean, 142
Monti, Mario, 139
The Moral Basis of a Backward Society (Edward and Laura Banfield), 132
Multilateral surveillance (EMU), 95
Multipolar currency system, 110–121, 195–197, 237
and challengability of U.S. dollar, 114–115
and current trends in euro/dollar reserve statuses, 113–114
euro as key player in, 116–119, 117f–119f
main advantage of, 121
preconditions for reserve currency status, 111–113
and Special Drawing Right, 115–116
N
National sovereignty, of European nations, 91–92
N’Diaye, Papa, vi
The Netherlands:
country banks of, 9
in EMU, 98
GDP per hour worked in, 32, 33f
government expenditures in, 140f
life expectancy in, 44f
productivity growth in, 31f
productivity in, 19
robust economy of, 12–13
New world order, questions in debate over, xv
New Zealand:
GDP per hour worked in, 33f
productivity growth in, 31f
Nikkei 225 Index, 54f
Nixon, Richard, xviii, 28, 188, 209
Nomisma, Byzantine, 202
Norway:
GDP per hour worked in, 32, 33f
productivity growth in, 31f
O
Obama, Barack, and administration, 189, 198
O’Dell, Carla, 10–11, 13
OECD 30, GDP per hour worked in, 33f
OECD countries: