“Under this system [Bretton Woods II and the petrodollar], the U.S. is running massive current account deficits to be the source of export-led growth for other countries.To fund this deficit, central banks, particularly those on the Pacific Rim, are buying up dollars and dollar-denominated assets.”
Daniel Drezner
“The inability of global leaders to address global current account imbalances now truly threatens global financial stability. Perhaps this was inevitable – the dollar has not depreciated to a degree commensurate with the financial crisis.
Moreover, as the global economy stabilized the old imbalances made a comeback, sucking stimulus from the US economy and leaving US labor markets crippled.
The latter prompts the US Federal Reserve to initiate a policy stance that will undoubtedly resonate throughout the globe. As a result we could now be standing witness to the final end of Bretton Woods 2. And a bloody end it may be.”
Tim Duy
