The Great Recession and the Contradictions of Contemporary Capitalism

The Great Recession and the Contradictions of Contemporary Capitalism

New Directions in Modern Economics series

Edited by Riccardo Bellofiore and Giovanna Vertova

The current crisis is one of the great crises punctuating the long history of capitalism, and to be properly understood it is vital to take into account its ongoing structural transformation. This book offers plural perspectives on the Great Recession, placing the analysis of finance, class and gender at the center of the debate. It begins with a comprehensive insight into the crisis, before moving on to focus on debt, asset inflation and financial fragility. Following chapters discuss global imbalances, structural monetary reform and the management of public finance, including a investigation of the Italian experience. The book concludes with novel contributions on the gender dimension of the crisis and the analogies between a nuclear and financial chain reaction.

Chapter 8: A structural monetary reform to reduce global imbalances: Keynes’s plan revisited to avert international payment deficits

Sergio Rossi

Subjects: economics and finance, money and banking, post-keynesian economics


The global financial crisis that broke out in 2007 is the result of a structural disorder that has been increasingly harming the world economy since the full ‘demonetization’ of gold in international transactions. Under the international gold (-exchange) standard, as a matter of fact, foreign trade imbalances were settled by a transfer of property rights on the equivalent stock of gold between the countries involved. International payments were thus final, as they left surplus countries with no further claims on deficit countries, both defined as the set of their own residents. Since the so-called post-Bretton Woods regime put the US dollar at centre stage in international finance, by way of contrast, international payments have become provisional, as settlements for foreign transactions are carried out using so-called key currencies, which are, in fact, simply promises of payment, as they do not imply the transfer of their object (namely, bank deposits) from the payer to the payee country. To be sure, no unit of US dollar deposits can leave the national banking system when any US importer finally pays an exporter residing in the rest of the world. This is so because of the book-entry nature of bank deposits, and has nothing to do with agents’ behaviour. Indeed, the agent who imports any items from the rest of the world, finally pays their exporters when s/he disposes of the required amount of bank deposits.

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