Table of Contents

Handbook of the International Political Economy of Monetary Relations

Handbook of the International Political Economy of Monetary Relations

Handbooks of Research on International Political Economy series

Edited by Thomas Oatley and W. Kindred Winecoff

This extensive Handbook provides an in-depth exploration of the political economy dynamics associated with the international monetary and financial systems. Leading experts offer a fresh take on research into the interaction between system structure, the self-interest of private firms, the political institutions within which governments make policy, and the ideas that influence beliefs about appropriate policy responses. Crucially they also assess how these factors have shaped the political economy of various facets of monetary and financial systems.

Chapter 24: Our (gracious?) benefactors: US, Japan, China, and East Asian monetary relations

Emmanuel Yujuico

Subjects: economics and finance, political economy, politics and public policy, international politics, political economy, public policy

Extract

Foreigners are out to screw us. Our job is to screw them first. (John Connally, United States Treasury Secretary, 1971-72) The candid statement above was made by Richard Nixon's Treasury Secretary to drive home the point that holding an international monetary conference made no sense at a time when European nations were the world's largest holders of dollar reserves (Gavin 2007, 194). Then, as now, debates concerned burgeoning United States (US) current account and fiscal deficits viewed as unsustainable. For better or worse (as other chapters in this volume illuminate), part of the eventual solution chosen by the Europeans involved creating their own currency that would mitigate the need to hold reserves denominated in others' monies. Nowadays, of course, East Asian countries have accumulated historically unprecedented amounts of foreign exchange reserves - $6 trillion plus and counting - due to running continually large current account surpluses. In other words, they have inherited problems the Europeans had. After considering the deficiencies of the international monetary system (IMS), international political economy (IPE) stalwart Robert Gilpin ultimately described its contemporary form as a 'non-system' (Gilpin 2001, 239). Nowhere is the lack of features Gilpin enumerated characteristic of an international monetary system - adjustment, liquidity, and confidence - more evident than in East Asia after the demise of the Bretton Woods system.

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