Development and Finance from issue 2010/2

Tamás Gábor

The Assymetrical Dollar-Based Monetary System and Global Financial Imbalances

- Abstract -

JEL F-33

 

Since the collapse of the Bretton-Woods system the global financial system has been more or less characterised by a global financial imbalance. By this definition we mean the synchronicity of the following processes: (1) the rising current account deficit of the USA, contrasted with the current account surpluses of developing, emerging economies; (2) the accumulation of American financial instruments, especially government bonds, in the central bank reserves of certain emerging economies (China, India, Brazil, Russia, Arab countries); (3) the record high consumption in the USA and the all-time low savings, contrasted with the further increase in the savings rate in developing countries, even exceeding the rather high investment rate; (4) the tendency in emerging economies to peg their currencies to the dollar in some form; (5) the liquidity and speculation in the global economy that has grown many-fold compared to previous periods and the real economy. In my opinion, the current global economic crisis highlighted the weaknesses of the dollar-based system, the unsustainable character of the unipolar global system, and the necessity to reform multinational financial organisations, such as the International Monetary Fund.


Tamás Gábor, PhD student (Szeged University of Sciences, Doctoral School of Economics)

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