THE UNITED STATES DOLLAR AND GLOBAL MONETARY POLICY
Early in 2002, several G-7 economies ? notably Germany, Japan, and the United States ? are officially in recession. Further, many of the world's second level, or peripheral, economies are in desperate straits. Many of the peripheral economies ? Singapore and Taiwan are examples ? are suffering because of slack demand in the major industrial economies for imported goods from the peripheral economies. Simultaneously, other peripheral economies face total monetary and fiscal collapse ? Argentina and Indonesia are examples.
With the global economic background described above as the perspective, the focus of this essay is the relationship between the United States dollar and global monetary policy, and, in turn, the impact of this relationship on global economic outcomes. The objective of this focus is to consider what changes are necessary to restore economic stability and growth on a global basis.
Within the context of this focus and the linked objective, three points are crucial. These points (discussed following their identification) are as follows:
Not all of the problems afflicting the global economies and the national economies that comprise the global economy are monetary in character
Monetary policy does not in and of itself create demand in the economy ? global or national
The current global monetary system does not have a reliable anchor ? the United States dollar is the benchmark for assessing the exchange value of other global currencies
The first point to consider is that all of the problems afflicting the global economies and the national economies that comprise the global economy are monetary in character. Structural problems exist in most of the economies of the world. The effective addressing of structural issues is essential to restore global economic stability and growth. Addressing these issues, however, must occur on a national level, not ...