The Global Economic Order
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The Global Economic Order

The International Law and Politics of the Financial and Monetary System

Elli Louka

Exploring in depth the institutions that underpin the global economy, this study provides invaluable insights into why a minimum economic order has endured for so long and why states are unwilling to establish a maximum order, a global safety net for all. The author investigates how debt – a critical component of states’ economic infrastructure – leads to debilitating crises, and how these crises undermine the economic autonomy and political independence of states. 
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Chapter 6: The gold standard

Elli Louka

Abstract

The pre-World War I, gold-standard era lays bare the tradeoffs states must be willing to make to address the Trilemma. A country was on the gold standard if its central bank specified a fixed exchange rate between the domestic currency and gold and was willing to buy and sell gold at this fixed exchange rate. The gold-standard era ushered the first globalization as market participants were confident that states were ready to sacrifice domestic economic policy prerogatives that put at risk their foreign economic policy agenda – the fixed ER of their currency to the gold. States, though, were unfaithful executioners of the gold standard. Many of them violated the rules of the game dictated by the gold standard to pursue economic policies aligned with domestic objectives.

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