The Exhaustion of the Dollar Its Implications

The US dollar has served as the key currency of the international economic/financial system for over fifty years. This study assesses the proposition that the series of US current-account deficits over the last twenty years will shortly exhaust the capability of the dollar to continue as the key currency. The evidence in support of the proposition is strong. The implications of exhaustion will be serious and need to be addressed quickly.

H. Peter Gray is Professor Emeritus of international economics and business at Rutgers, the State University of New Jersey and at Rensselaer Polytechnic Institute.

List of Tables

ix

List of Figures

x

Preface

xi

Preface to the Paperback Edition

xiii

Foreword

xv

Ray Canterbery

Part I Introduction

1

(32)

The Purpose and Three Propositions

3

(30)

Part II How a Hegemonic System Works

33

(54)

Background Concepts and Relationships in a Globalized World

35

(17)

A Theory of Balance-of-Payments Adjustment for the Hegemon

52

(21)

A Model of Instability in Asset Markets

73

(14)

Part III Exhaustion: Soft, Hard or Very Hard Landing

87

(54)

The Data

89

(22)

Assessing Propositions One and Two

111

(16)

The Efficiency of Adjustment

127

(14)

Part IV Confronting the Future

141

(32)

Policy Options and Constraints

143

(14)

The Transition Problem

157

(5)

Proposed Agenda for Redesign

162

(11)

Part V Concluding Assessment

173

(19)

The Grim Prospect Ahead

175

(7)

The Implications of the Increasing US International Dissaving in 2003 and 2004

182

(10)

Notes

192

(25)

References

217

(7)

Index

224

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The Exhaustion of the Dollar Its Implications for Global Prosperity

Summary

Author Biography

Table of Contents

Supplemental Materials