Development and Finance from issue 2009/3

Tamás Morva

Overproduction and Overspending in the USA - The Awkward Crisis

- Abstract -

JEL E-32

In the history of crises so far it has been unprecedented that in an economy of this size, like the USA, indicators of overproduction and unlimited overspending should be present simultaneously. Overspending was enabled among many other things by the dollar being a key currency, the no. 1 reserve currency. At the G20 summit and in bilateral negotiations the role of the dollar was not questioned in the end. The parent countries of the euro or the yen are in a grave economic crisis themselves, and even if they used to have some ambitions they have surely set them aside by now. China is not interested in destroying the dollar either, it is rather striving to strengthen its own positions by means of its reserves, not to mention the fact that the Chinese economy is far from being able to provide a background for such a function. However, the global market, just like economic crises, is regulated by objective rules based on economic relations. The shattered confidence is not a psychological question but an expression of interests. It would be difficult to tell what type of impacts the uncertain fundamentals of international finances might induce and when, and how they will affect the United States.

Tamás Morva, economist

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