The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance
3.5/5
()
Currently unavailable
Currently unavailable
About this ebook
The U.S. dollar’s dominance seems under threat. The near collapse of the U.S. financial system in 2008–2009, political paralysis that has blocked effective policymaking, and emerging competitors such as the Chinese renminbi have heightened speculation about the dollar’s looming displacement as the main reserve currency. Yet, as The Dollar Trap powerfully argues, the financial crisis, a dysfunctional international monetary system, and U.S. policies have paradoxically strengthened the dollar’s importance.
Eswar Prasad examines how the dollar came to have a central role in the world economy and demonstrates that it will remain the cornerstone of global finance for the foreseeable future. Marshaling a range of arguments and data, and drawing on the latest research, Prasad shows why it will be difficult to dislodge the dollar-centric system. With vast amounts of foreign financial capital locked up in dollar assets, including U.S. government securities, other countries now have a strong incentive to prevent a dollar crash.
Prasad takes the reader through key contemporary issues in international finance—including the growing economic influence of emerging markets, the currency wars, the complexities of the China-U.S. relationship, and the role of institutions like the International Monetary Fund—and offers new ideas for fixing the flawed monetary system. Readers are also given a rare look into some of the intrigue and backdoor scheming in the corridors of international finance.
The Dollar Trap offers a panoramic analysis of the fragile state of global finance and makes a compelling case that, despite all its flaws, the dollar will remain the ultimate safe-haven currency.
Related to The Dollar Trap
Related ebooks
The US Dollar and Global Hegemony Rating: 0 out of 5 stars0 ratingsThe Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance Rating: 4 out of 5 stars4/5Financial Crisis, Contagion, and Containment: From Asia to Argentina Rating: 5 out of 5 stars5/5The Dollar Crisis: Causes, Consequences, Cures Rating: 4 out of 5 stars4/5The New Depression: The Breakdown of the Paper Money Economy Rating: 4 out of 5 stars4/5Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions Rating: 5 out of 5 stars5/5The American Phoenix: And why China and Europe will struggle after the coming slump Rating: 0 out of 5 stars0 ratingsCapital Wars: The Rise of Global Liquidity Rating: 0 out of 5 stars0 ratingsInterest Rate Cycles: An Introduction Rating: 5 out of 5 stars5/5What Caused the Financial Crisis Rating: 5 out of 5 stars5/5The Introduction to The Evil Axis of Finance Rating: 0 out of 5 stars0 ratingsThe Great Crash Of 2008 Rating: 5 out of 5 stars5/5From Financial Crisis to Global Recovery Rating: 5 out of 5 stars5/5Currency and Coercion: The Political Economy of International Monetary Power Rating: 0 out of 5 stars0 ratingsThe Shadow Market: How a Group of Wealthy Nations and Powerful Investors Secretly Dominate the World Rating: 4 out of 5 stars4/5The Second Great Contraction: From This Time Is Different Rating: 4 out of 5 stars4/5The Historical Performance of the Federal Reserve: The Importance of Rules Rating: 0 out of 5 stars0 ratingsThe Restructuring of Capitalism in Our Time Rating: 0 out of 5 stars0 ratingsSovereign Wealth Funds: Legitimacy, Governance, and Global Power Rating: 4 out of 5 stars4/5The American Almanac of Finance: From the Gold Standard to Digital Currencies Rating: 0 out of 5 stars0 ratingsGlobalizing Capital: A History of the International Monetary System - Third Edition Rating: 5 out of 5 stars5/5Money: Free and Unfree Rating: 0 out of 5 stars0 ratingsFinancialization: Economic and Social Impacts Rating: 0 out of 5 stars0 ratingsThe Political Economy of the Special Relationship: Anglo-American Development from the Gold Standard to the Financial Crisis Rating: 0 out of 5 stars0 ratingsMoneynomics: The Evolution of Money in Theory, Practice, and Policy Rating: 0 out of 5 stars0 ratingsBankrupt: Global Lawmaking and Systemic Financial Crisis Rating: 0 out of 5 stars0 ratingsThe US Dollar and the BRICS Challenge - Heading Toward a New Global Financial Order Rating: 0 out of 5 stars0 ratingsFed Up!: Success, Excess and Crisis Through the Eyes of a Hedge Fund Macro Trader Rating: 0 out of 5 stars0 ratingsHow the West Was Lost: Fifty Years of Economic Folly--and the Stark Choices Ahead Rating: 3 out of 5 stars3/5Remembering Inflation Rating: 0 out of 5 stars0 ratings
Economics For You
Economics For Dummies, 3rd Edition Rating: 5 out of 5 stars5/5Quiet Leadership: Six Steps to Transforming Performance at Work Rating: 4 out of 5 stars4/5How to Be Everything: A Guide for Those Who (Still) Don't Know What They Want to Be When They Grow Up Rating: 4 out of 5 stars4/5Wise as Fu*k: Simple Truths to Guide You Through the Sh*tstorms of Life Rating: 4 out of 5 stars4/5Economix: How and Why Our Economy Works (and Doesn't Work), in Words and Pictures Rating: 4 out of 5 stars4/5Economics 101: From Consumer Behavior to Competitive Markets--Everything You Need to Know About Economics Rating: 4 out of 5 stars4/5The Intelligent Investor, Rev. Ed: The Definitive Book on Value Investing Rating: 4 out of 5 stars4/5You Can't Lie to Me: The Revolutionary Program to Supercharge Your Inner Lie Detector and Get to the Truth Rating: 4 out of 5 stars4/5Capital in the Twenty-First Century Rating: 4 out of 5 stars4/5The Hard Truth About Soft Skills: Soft Skills for Succeeding in a Hard Wor Rating: 3 out of 5 stars3/5Divergent Mind: Thriving in a World That Wasn't Designed for You Rating: 4 out of 5 stars4/5A History of Central Banking and the Enslavement of Mankind Rating: 5 out of 5 stars5/5Sex Trafficking: Inside the Business of Modern Slavery Rating: 4 out of 5 stars4/5Capitalism and Freedom Rating: 4 out of 5 stars4/5The Richest Man in Babylon: The most inspiring book on wealth ever written Rating: 5 out of 5 stars5/5Recession-Proof Real Estate Investing: How to Survive (and Thrive!) During Any Phase of the Economic Cycle Rating: 5 out of 5 stars5/5The Sovereign Individual: Mastering the Transition to the Information Age Rating: 4 out of 5 stars4/5Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail Rating: 4 out of 5 stars4/5Talking to My Daughter About the Economy: or, How Capitalism Works--and How It Fails Rating: 4 out of 5 stars4/5Chip War: The Fight for the World's Most Critical Technology Rating: 4 out of 5 stars4/5The Lords of Easy Money: How the Federal Reserve Broke the American Economy Rating: 4 out of 5 stars4/5Nickel and Dimed: On (Not) Getting By in America Rating: 4 out of 5 stars4/5The Affluent Society Rating: 4 out of 5 stars4/5The Myth of Capitalism: Monopolies and the Death of Competition Rating: 4 out of 5 stars4/5Confessions of an Economic Hit Man, 3rd Edition Rating: 5 out of 5 stars5/5The Spirit Level: Why Greater Equality Makes Societies Stronger Rating: 4 out of 5 stars4/5The Price of Time: The Real Story of Interest Rating: 5 out of 5 stars5/5
Reviews for The Dollar Trap
3 ratings1 review
- Rating: 3 out of 5 stars3/5In this worthwhile book Eswar Prasad presents the view that the post WWII world reserve currency,the US dollar, now has a more multifaceted role. Despite record US budget and trade deficits it still maintains its reserve status and he highlights the organizations that would like to keep it this way.He makes it fairly clear for example that the Chinese government has for years been operating a Mercantilist policy (recycling dollar trade surpluses into dollar bonds) to lower the renminbi/dollar exchange rate and support/protect their extensive export industries.For their part the US government welcomes the perpetual Asian funding of their deficits allowing them to "kick the can down the road" and avoid the politically dangerous structural issues of cutting services or raising taxes.Equally, US companies are happy with record profits as they move US manufacturing jobs to low cost Asian countries. They obviously want their production to stay cheap in dollar terms which means supporting Chinese dollar recycling and the general idea of free trade/free capital flows.In turn, the US public has come to expect "Every Day Low Prices" based on Asian sourcing and this seems be part of an unwritten bargain in return for "Every Day Low Interest Rates" on their savings (if they have any) and generally low taxation (at least by European standards).Prasad sees this as a stable but fragile equilibrium and titles the book "The Dollar Trap" to reflect the discomfort of Asian dollar bond holders with their excess capital risk and the US financial authorities with their excess funding needs. He shows Bernanke trying to defuse the situation with calls for the Chinese to revalue their currency (and help the US trade deficit) and for Congress to tackle structural budget deficits, although it all seems to fall on deaf ears.A problem with the book could be described as the Dani Rodrik view (ref. his book, "The Globalization Paradox: Democracy and the Future of the World Economy"). Basically Rodrik disagrees with the convenient neo-liberal view that the "World is Flat" and convincingly shows that countries that participate in world trade are at different points in the development cycle and have differing needs. US corporations go to China in search of a reliable source of long term cheap labour (equals higher profits), whereas the Chinese view export industries as a source of technological skill development, higher employment (than importers) and a route to industrial development (i.e. they plan to learn and compete with the US higher up the value chain, which they are successfully doing).If Rodrik is right, then the situation is not "stable but fragile", but is becoming increasingly unstable as the US loses more higher value added industries to Asia, sees increasing services outsourcing and runs even larger trade deficits, quite apart from future domestic welfare commitments.The author could maybe also have explored more fully the "Currency War" idea. He frames mercantilism as a Currency War but doesn't show that Currency Wars are quite winnable. The victor of the 1920's post WWI currency war was undoubtedly Weimar Germany. Their large scale currency printing resulted in a very competitive export industry, buzzing factories, employment for millions of soldiers returning from the war and the wiping out unpayable foreign and domestic government debts. The downside of course was that by 1923, the price of a cabbage that has recently sold for 25 pf now cost 50.000.000 marks and the German middle class was ruined (see Bernd Widdig's excellent book "Culture and Inflation in Weimar Germany").Widdig's view is that Weimar budget deficits covered by money printing betrayed the people's trust in the German government but Prasad takes the line that FED printing (in the face of insufficient Asian bond purchases) will be constrained by the political power of Americas fixed income electorate such as pensioners, bondholders, insurance funds etc. This may be wishful thinking, as the German (actually mostly ethnic non-German) financial elite easily avoided hyperinflation by borrowing large sums that went straight into foreign currency and real estate and they came out of the other side of hyperinflation with their power enhanced. There isn't any compelling reason why the US financial elite couldn't do the same, especially as 3/5 of US bonds are owned by non-Americans.There is also an element of inertia in the use of the dollar as a reserve currency which he could have look at. It has been the standard unit of exchange since WW2 and perhaps it is just convenient to pretend that nothing has changed as long as things hold together. It's interesting in this regard that Sterling still had a partial role as a reserve currency as late as the 1970's despite Great Britain's spectacular industrial failure, large budget and trade deficits and a hard line socialist government. In their interesting book, "Goodbye Great Britain, the 1976 IMF Crisis", Burk and Cairncross show that this residual reserve role only disappeared when UK inflation hit 30% p.a. in 1975.The author says at various points that there is no realistic alternative to the Dollar for large institutional investors and downplays the Euro although the Euro zone has a similar share of world GDP as the US, less debt and a balanced trade account. It meets his criteria for a reserve currency and presumably German opposition to inflationary policies should also serve as a useful backstop.In chapter 11 he proposes a rather unconvincing international insurance scheme to protect deficit nations from rapid currency outflows with the idea that deficit nations should pay larger premiums in view of their higher risk profiles, when perhaps he could have gone directly to the point and suggested making all currencies (of nations wishing to trade) freely convertible for trade in goods and services and FDI but banning the capital account and portfolio transactions that are the root of the problemAll countries would then be responsible for their own surpluses and deficits with their economic efficiency and government budget policies reflected in their exchange rates.