From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Nov 24 2004 - 18:21:21 EST
Rakesh At one level, I don't get this argument. The world is on a dollar not gold standard (as MacKinnon and Davidson have underlined). And as provider of the only near world money, the US is in obliged increase the quantity of money to meet the growing international circulation of commodities. The US Fed is in some ways like the gold sector in Marx's reproduction schema: it's where the money comes from. The US therefore runs massive deficits (i.e. receives gratis real goods and services), but isn't that just the US' exorbitant privilege as issuer of (near) world money. ------------- The dollar only has compulsroy circulation in the US The world need not be permanently on a dollar standard, it is quite possible that the euro might replace it as the main reserve currency. Note how much it has appreciated against the dollar recently. The continuing us trade deficit increases the chances of this unless the gains to be had in interest can outweigh the capital loss of holding dollar assets. Hence Roach's remarks about the federal reserve having to raise rates. Without that the ability of the US govt to fund its current account deficit will be in peril. about the likelyhood of a ra
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