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U.S. DOLLAR AND GLOBAL MONETARY POLICY.   Term Paper ID:29471 Click to get this paper

Essay Subject: U.S. dollar as the benchmark for assessing the exchange value of other global currencies.... More...

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Paper Abstract: U.S. dollar as the benchmark for assessing the exchange value of other global currencies. Impact on global economic outcomes. Discusses changes needed to restore economic stability and growth on a global basis. Structural problems existing in most the economies of the world. Problem of recession in peripheral economies. Suggests a global central bank. Paper Introduction: 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 Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Retrieved fromthe Internet 2 2- 1-25 at: wysiwyg://182/http://www.economist/PrinterFriendly.cfm?Story_ID=963 64 Stevenson, R. The few,unfortunately, were primarily con artists with little intention ofinvesting their gains in economically productive activities. The Enron debacle, in turn and together with itssmaller cousins, are leading to a destruction of the Protestant ethic inthe United States that links directly effort and benefit. (2 2, January 25). Structural problems exist in most ofthe economies of the world. Breaking these links is essential if thesethree entities are to develop policies and initiatives that will (1)restore economic and financial integrity to each entity and, in turn, (2)restore economic stability and growth in the Japanese economy. New York Times onthe Web. Thebeige book: Summary of commentary on current economic conditions.Washington, DC: Federal Reserve System. Addressingthese issues, however, must occur on a national level, not a global level.Japan, as an example, has a counterproductive financial structure thatlinks corporations, financial intermediaries, and the national governmentin an incestuous relationship. Retrieved from the Internet 2 1- 1-26 at: http://www.nytimes.com Lynch, J., & Brick, M. New York Times on the Web. New York Times, C1. The rigidity of the gold standard createdproblems for the global monetary system, although not as dire as theproblems of relying on a single national currency as a standard. w. the united states dollar and global monetary policy Early in 2 2, several G-7 economies - notably Germany, Japan, and theUnited States - are officially in recession. The one-eyed man. Hope for calm, preparing for strife ateconomic talks. Fed chairman says tax cuts shouldfollow debt reduction. Anyone who doubts this contention should examine the situation inArgentina. The objective of this focus isto consider what changes are necessary to restore economic stability andgrowth on a global basis. Relatively low-level investment (venture capital),unrealistic promises (dot.com executives and brokerage houses), andunbelievable gullibility (institutional and individual investors)transferred massive wealth from the many to the few. Krugman, P. Such a global central bank could develop and refine astandard based on the special drawing rights (SDR) system used by theInternational Monetary Fund (IMF). With the global economic background described above as theperspective, the focus of this essay is the relationship between the UnitedStates dollar and global monetary policy, and, in turn, the impact of thisrelationship on global economic outcomes. The United States, to restore long-termeconomic stability and growth, must implement and enforce reasonableregulations for the conduct of business and financial activities. Fed makes 9th rate cut thisyear in effort to revive economy. The United States economy also suffers from an irrational belief inthe integrity of a wholly unregulated market. Therequired change might involve the establishment of a standard based on somemetal, but it also might involve the development of a basket of currenciesas a monetary standard, or, preferably, the establishment of a globalcentral bank. Many ofthe peripheral economies - Singapore and Taiwan are examples - aresuffering because of slack demand in the major industrial economies forimported goods from the peripheral economies. These points (discussed following theiridentification) 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 theglobal economies and the national economies that comprise the globaleconomy are monetary in character. Economist. In spite of an irrational belief in theUnited States that the dollar is a stable currency, it is not a stablemonetary benchmark because the real value of the United States declined byan average of four-percent per year over the past two decades. Another problem with the role of the United States dollar in thecurrent global monetary system is that the development of monetary policyfor the world effectively occurs in a single country. A similar massive transfer of wealth occurred in the United States inthe dot.com IPO boom. Retrieved from the Internet 2 2- 1-26 at: http://www.federalreserve.gov/FOMC/BeigeBook/2 1/2 11 24/default.htm Herbert, B. What's a recovery without jobs. This belief made possiblethe Enron debacle. Board of Governors, Federal Reserve System. Regardless of the arguments about theinterdependence of the national economies around the world, the focus ofmonetary policy in the United States is not on the needs of the globaleconomy. (2 2, January 25). The effective addressing of structural issuesis essential to restore global economic stability and growth. References Baker, A. Most of thebenefits of such privatization programs accrued to a relatively handful ofwealthy domestic and foreign entities. The anticipated wider economicbenefits of privatization were lower than either expectations or promises.The structure of future privatization programs must tie the privatebenefits of buyers to public benefits for the economy, with controls thatkeep the wealth within the country and exact penalties for failure. This situation is untenable because the United Statesdollar is not a stable benchmark. When constraints affectunderlying demand, modifications of monetary policy can stimulate demand.Alternatively, when underlying demand distorts the demand-supplyrelationship, modifications to monetary policy can moderate demand. (2 1, October 31). The objectives ofsuch policies are admirable, but placing the onus on individual firmscompromises the capacity of firms to compete in the global economy.Required restructuring in such economies should shift the burden from adirect corporate expense to a social tax borne by all households andbusinesses. The series of interestrate reductions in the United States in 2 1 did not create new demand.This outcome should not be surprising to anyone, as a similar phenomenonoccurred in the early-198 s in the United States. Within the context of this focus and the linked objective, threepoints are crucial. The third point to consider is that the current global monetary systemdoes not have a reliable anchor - the United States dollar is the benchmarkfor assessing the exchange value of other global currencies. Thus, theglobal monetary system is a bizarre environment in which the value of allglobal currencies but one are tied to that one currency whose value sinkslike a rock in the ocean as time passes. (2 2, January 25). (2 1a, October 24). The second point to consider is that monetary policy, alone, does notcreate demand in the economy - global or national. The destructionof this link eventually will destroy the confidence of the American peoplein the United States economy. This situation is not an argument for reinstating the gold standard inthe global monetary system. Retrieved fromthe Internet 2 1- 1-26 at: http://www. Simultaneously, otherperipheral economies face total monetary and fiscal collapse - Argentinaand Indonesia are examples. (2 2, January 28). In this one country,the United States, the objectives of monetary policy development are tobenefit the United States. nytimes.com Militant complacency. Further, many of the world'ssecond level, or peripheral, economies are in desperate straits. Whenunderlying demand shrinks as occurred in 2 1, however, fiscal stimulus inthe form of governmental expenditure is more effective as a creator ofdemand. New York Times, C2. Therelegation of gold to the sidelines in global economic policy left theglobal economic system without an anchor. Poorly structured privatization programs in many peripheral economiescreated little more than a massive transfer of wealth from the publicsector to favored buyers of formerly state-owned enterprises. NewYork Times, B-2. Currently, the United Statesdollar is the benchmark used to establish the exchange value for all otherglobal currencies. France and Germany, among other countries, pursue social policiesthrough laws placing the onus on corporations to preserve jobs and workerbenefits regardless of external economic conditions. The United States needs such a demand stimulus in early-2 2. (2 1, October 2). 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