GDP per hour worked in, 33f
government expenditures in, 139, 140, 140f
productivity growth in, 31f
OEEC (Organisation for European Economic Co-operation), 92
Oil, 70
Open markets:
Chinese stand against, 50
and success as international currency, 22
and the U.S. dollar, 45–48, 47f
Organisation for Economic Co-operation and Development (OECD) (see OECD countries)
Organisation for European Economic Co-operation (OEEC), 92
Over-the-counter market, foreign exchange market as, xix
P
Pakistan, 39
Paper money, 204
fiat vs. backed by gold, xvii, xviii, 204
in history, 6
linked to metals, 27
Paul, Ron, 29, 217
Pension funds, deflation of, 64
Pension reforms, for China, 177
People’s Bank of China, xx–xxi
Per capita income, historical rise in, 11
Personal debt, in the United States, 4f
Pettis, Michael, 239
Philippines, export value added in GDP, 166f
PIIGS countries, 9
net debt outstanding, 23f
productivity growth in, 32
(See also individual countries)
Plaza Accord, xxi–xxii, 63–64
Poland:
GDP per hour worked in, 33f
productivity growth in, 30, 31f
Population decline:
in China, 38, 39
in Europe, 137–138, 140–141
and future of the euro, 135–138, 138f, 140–141
Population growth:
in China, 37, 38f
in United States, 37
Portfolio investment, in euro area, 118f
Portugal:
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
manufacturing in, 59
net debt outstanding, 23f
political society of, 132
potential exit from eurozone, 149–150
productivity growth in, 31f, 32
Pound sterling (see British pound sterling)
PPP (purchasing power parity), 74
Private consumption:
in China, 40f, 42, 172–173, 172f, 221–222, 228
in the U.S., 4
Productivity growth:
in China, 229
in Europe, 61
and military spending, 21
in robust economies, 10–20, 12f, 18f, 19f
and the middle class, 14–15
the Netherlands, 12–13
and railroads, 17
United Kingdom, 13–16
United States, 16–20, 17f
for success as international currency, 21–22
and the U.S. dollar, 30–36, 31f, 33f–35f
Protection, gold as, 217
Protectionism, 117, 219, 226
Province of China, export value added in GDP, 166f
Purchasing power parity (PPP), 74
Q
Quantitative easing (QE), xi, xii, 28–29
and ECB LTRO, 152–153
Fed’s use of, 212
R
Railroads, robustness of economies and, 17
Real, Brazilian, xxii
Real de a ocho, 6
Real estate investment:
in China, 46
housing bubbles, 64
Real estate prices, in Japan, 53, 55f
Recycled dollars, 69–70
Renminbi (see Chinese yuan)
Reserve currency(-ies), 131f, 195–197
advantages of being, 1–4, 2f–4f
advantages of gold over, 24–26, 25f, 26f
Chinese yuan (RMB) as, 86–89, 233–238
and drawbacks of gold, 27–29, 28f
euro as, xiii, 7–8, 8f, 83–84, 100, 101f, 113–114, 113f, 130, 131f
and future of the euro, 129–130, 131f
hegemonic, 73–89
and central banks’ holdings of dollars, 84–86
challenges to Chinese yuan as, 86–89
and incumbency advantage, 76–80, 79f
and previous writing off of U.S. dollar, 80–84, 82f
and size of the economy, 74–76
and history of factors affecting currencies, 5–10, 8f
multipolar currency system, 110–121, 195–197
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
necessary ingredients for, 21–24, 23f
need for, 24–30, 25f, 26f, 28f, 30f
advantages of gold, 24–26, 25f, 26f
drawbacks of gold, 27–29, 28f
one vs. two currencies, 29–30
and new global reserve system, xiv
origin of, xviii–xix
preconditions for status as, 111–113
primary, 10
and robustness of economies, 10–21
Dutch, 12–13
and the middle class, 14–15
and military might, 20–21
and productivity growth, 10–20, 12f, 18f, 19f
and railroads, 17
United Kingdom, 13–16
United States, 16–20, 17f
SDR as, 196–199
sterling as, 6–7, 20
top five issuers of, 76
U.S. dollar as, xii–xiii, xviii, xxii–xxiii, 7, 8f, 110–112
(See also International trade and reserve currency)
Reserve managers, euros accumulated by, xii
Reserve requirements, 52
Rickards, James, vii
Risk aversion, 227
RMB (see Chinese yuan (renminbi))
Robust economies, 10–21
Dutch, 12–13
and the middle class, 14–15
and military might, 20–21
productivity growth in, 10–20, 12f, 18f, 19f
and railroads, 17
United Kingdom, 13–16
United States, 16–20, 17f
Roman aureus, 24, 202
Roman Empire, 5, 10, 11, 22, 202
Roosevelt, Franklin D., 188, 206, 207
Russia:
and criteria for hegemonic reserve currency, 75
in G-20, 190
GDP of, 33f, 120
in global economic decisions, xii
gold bought by, 214
government expenditures in, 140f
money pouring into, xiii
productivity growth in, 31f
S
Safe haven currency, U.S. dollar as, xxii–xxiii, 77
Sarkozy, Nicolas, xiv, 78
Saving rate:
in China, 41–42, 41f
in Japan, 56, 56f
in the United States, 3, 3f, 4
Schumann, Walter, 142
Schwartz, Anna, 126
SDRs (see Special Drawing Rights)
Seignorage, 130
Self-insurance, 75
Services sector (China), 173, 174f, 228, 229
SGP (Stability and Growth Pact), 105, 106
Shadow financing, in China, 46–47
Shanghai Composite Index, 45
Shilling, Gary, vii
Silk Road, 11
Silver:
coins of, 202–203
free coinage of, 27
Singapore:
export value added in GDP, 166f
open markets in, 52
and qualifications for international/reserve currency, 22
Singh, Anoop, vii
Slovakia:
GDP per hour worked in, 33f
productivity growth in, 30, 31f
Slovenia, GDP per hour worked in, 33f
Smith, Adam, 12
Smithsonian Agreement, 93
Social welfare system:
in China, 41, 42
in Europe, 134–135, 138–140
and future of the euro, 135–136, 138–139
in Japan, 56
Solidus (see Byzantine solidus)
South Korea:
in G-20, 190
GDP per hour worked in, 33f
productivity growth in, 30, 31f, 32
(See also Korea)
Sovereign debt, 9
in eurozone, 137
and eurozone crisis, 29, 103–104, 104f
net debt outstanding, 23f
of the United States, 111, 216f
Spain, 6
bailout of, 8
in EMU, 98
and euro interest rates, 60
and eurozone crisis, 9
future of, 151–155
GDP per hour worked in, 33f
government expenditures in, 140f
housing market in, 60, 64
labor costs in, 59
life expectancy in, 44f
manufacturing in, 59
net debt outstanding, 23f
political society of, 133
productivity growth in, 31f, 32
Spanish dollar, 6
Special Drawing Rights (SDRs), xv, 236
and multipolar currency system, 115–116
as new world reserve currency, 196–199
yuan in basket of, 49
Stability and Growth Pact (SGP), 105, 106
Sterling (see British pound sterling)
Stiglitz, Joseph, xiv
Stimulus spending:
in China, 50–51, 53
and current economic crisis, xi–xii
Stock market capitalization, 44
Strauss-Kahn, Dominique, xiv
Sweden:
GDP per hour worked in, 33f
productivity growth in, 31f
Swiss franc, 69, 212
international market share of, 74
as reserve currency, 131f
Switzerland, 22
economy of, 74
GDP per hour worked in, 33f
government expenditures in, 140f
life expectancy in, 44f
productivity growth in, 31f
T
Taiwan, export value added in GDP, 166f
Tangible asset deflation, 64, 65f
Taylor, John, vii–viii
Technologies, for productivity, 36
Temporary employment (United States), 35, 36
Thailand:
export value added in GDP, 166f
gold bought by, 214
Thatcher, Margaret, 125
Tinbergen, Jan, 133–134
Trade currencies:
British pounds, 6
as primary reserve currencies, 10
U.S. dollars, 2, 80
(See also International trade and reserve currency)
Trade routes, 6, 11, 13
Trade wars:
and competitive devaluation, xiii
from currency wars, 189
potential, with China, 226
Treaty on European Union, 95
Trichet, Jean-Claude, 62, 91
Triffin, Robert, 68
Triffin dilemma, 68, 87
Turkey:
GDP per hour worked in, 33f
government expenditures in, 140f
productivity growth in, 31f
U
Unemployment:
in China, 46
Chinese exporting of, 223
United Kingdom:
and currency war of 1930s, xiii
debt as percent of GDP, 55
decline of leading role of, 7
equity market capitalization, 23f
fertility rate in, 43f
in G-20, 190
GDP of, 32, 33f, 37f
gold standard in, 24, 205
in Industrial Revolution, 6–7
life expectancy in, 44f
net debt outstanding, 23f
and Plaza Accord, xxi–xxii
productivity growth in, 18, 18f, 31f, 32
productivity in, 19, 21
robustness of economy, 13–16
stock market capitalization in, 44
(See also individual countries)
United States:
basically uniform culture of, 59
budget deficit of, 2, 3
and characteristics of Americans, 89
and China’s currency peg, 222–223, 225–226
and currency war of 1930s, xiii
current account deficits of, 2–4, 67–68
debt as percent of GDP, 55
deflation in, 64–67, 65f, 66f
economic hegemony of, 224
equity market capitalization, 23f
federal deficits in, 3, 4
fertility rate in, 42, 43f
free markets in, 62
future of, 237
in G-20, 190
GDP of, 32, 33f, 35–37, 37f, 221
gold standard in, 7, 28, 188, 192, 205–207
immigrants to, 43
inflation rates in, 100, 210
life expectancy in, 44f
market capitalization of listed companies, 119f
massive debt of, xi, xii
monetary policy of, xx, 114
net debt outstanding, 23f
open market of, 22
personal debt in, 3, 4f
personal saving rate in, 3, 3f, 4
and Plaza Accord, xxi–xxii
population growth in, 37
productivity growth in, 18f, 31f, 32, 34–36, 34f
productivity in, 17–20
projected real GDP growth in, 4
railroads in, 17
ratio of working-age to older population in, 39
rebalancing growth in, 189
recessions in, 52
robustness of economy, 16–20, 17f
role in global monetary system, xii–xiii
as source of global liquidity, 130
sovereign debt crisis of, 111
stock market capitalization in, 44
support of defense spending in, 21
trade deficit of, xi, 4, 70, 223
trade relations with Japan, xxi–xxii
U.S. dollar:
current trends in reserve status of, 113, 114
exchange rate with euro, 101f
foreign exchange reserves, 101f
and “G-2” discussions, 191
gold standard for, xviii, 188, 192, 208–209
as hegemonic reserve currency
central banks’ holdings of dollars, 84–86
incumbency advantage for dollar, 76–80, 79f
and previous writing off of dollar, 80–84, 82f
as international trade and reserve currency, 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
and National Export Initiative, 189
and new reserve currencies, 195–197
policies that weaken, xii
previous writing off of, 80–84, 82f
recent waning confidence in, xiii
as reserve currency, xii–xiii, xviii, xxii–xxiii, 7, 8f, 29, 110–112, 131f, 208–209
as safe haven currency, xxii–xxiii, 77
shaken confidence in, xi
share of global currency reserves, 117f
silver certificates, 27
viability of challenges to, 114–115
weakness of, 29–30, 30f, 130
world’s largest holders of, xii
U.S. Treasuries:
foreign governments’ investment in, xxii, 69
investments in, 223–224
liquidity of, xix
market for, 22
ownership of, 44
and quantitative easing, xii
V
Value of currencies (see Currency values)
Venetian ducat (ducato), 6, 203
Venice, Italy, 6, 21
Vietnam, 39
Volcker, Paul, 73
W
Wage deflation, 65, 66f
Wages:
in China, 39
in eurozone, 60, 61
Werner, Pierre, 92
Werner Plan, 92–94
World Bank, xviii
World (global) economy, 220
BRIC nations in, xii
and central banks’ policies, 214–216
China’s power in, 235–236
current transition period for, 224–225
fundamental problem in, 236–237
and G-20 2009 summit rebalancing, 189–190
and gold standard, 129
historical growth in, 11–12, 12f
imbalances threatening, xi
in recession of 2008, 77
Y
Yen (see Japanese yen)
Yi Gang, 161
Yuan (see Chinese yuan (renminbi))
Z
Zhou Xiaochuan, 187
Zimbabwe, 205
Zoellick, Robert, xiv–xv, 201
Table of Contents
Title Page
Copyright
Contents
List of Contributors
Foreword
Preface
Introduction
CHAPTER 1: The Dollar Will Remain on First
CHAPTER 2: The World’s Hegemonic Reserve Currency: The U.S. Dollar Versus the Chinese Yuan
CHAPTER 3: The Euro: Past, Present, and Future
CHAPTER 4: What History Tells Us About the Euro’s Future
CHAPTER 5: The Future of the Eurozone: An amicable divorce is Better than an Unhappy Marriage
CHAPTER 6: Rebalancing Growth in China: The Role of the Yuan in the Policy Package
CHAPTER 7: Currency Wars and a Growing Role for the International Monetary Fund
CHAPTER 8: A Role for Gold
CHAPTER 9: China
References
Notes
Index