US Currency War Machine
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If the second monetarist revolution were to occur in the USA, then the world would find itself at the dawn of a new age of dollar hegemony. No longer would international investors have to fear that their dollar assets could suddenly erode in value due to the Federal Reserve taking big gambles with monetary stability so as pursue a shorter-term objective such as to accelerate the pace of economic expansion (and hopefully employment growth). These monetary gambles have often occurred as an essential component of a currency war strategy forged in a decentralized fashion within the US government (including the Federal Reserve as a semi-independent agency). With such war danger no longer present, much of the currency diversification of recent decades, as investors globally have sought safety by introducing monies other than the US dollar into their portfolios, would go into reverse.
KeywordsMonetary Policy Federal Reserve Current Account Deficit Trade Surplus Bretton Wood System
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