Edited by Thomas Oatley and W. Kindred Winecoff
Chapter 24: Our (gracious?) benefactors: US, Japan, China, and East Asian monetary relations
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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