By Lin J.Y.
In June 2008, Justin Yifu Lin was once appointed leader Economist of the realm financial institution, correct earlier than the eruption of the worst international monetary and monetary predicament because the nice melancholy. Drawing on event from his privileged place, Lin bargains precise reflections at the reason behind the obstacle, why it used to be so severe and frequent, and its most probably evolution. Arguing that traditional theories supply insufficient ideas, he proposes new projects for attaining international balance and fending off the recurrence of comparable crises sooner or later. He means that the quandary and the worldwide imbalances either originated with the surplus liquidity created via US monetary deregulation and free financial coverage, and recommends the production of an international Marshall Plan and a brand new supranational worldwide reserve foreign money. This thought-provoking publication will entice lecturers, graduate scholars, coverage makers, and someone drawn to the worldwide economic system
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Additional info for Against the Consensus: Reflections on the Great Recession
Therefore, although the three commonly accepted causes may have contributed to the global imbalances, they cannot be the fundamental cause. 22 What Caused the 2008–9 Global Crisis? org/db. 14 The hypothesis is that the global savings glut put extreme downward pressure on interest rates, catalyzing the real estate boom in many countries and the risky ﬁnancial innovations that were crucial to the crisis’s global contagion. 16 As a result, current account imbalances provide little information about a country’s role in international borrowing, lending, and ﬁnancial intermediation; about how its real investments are ﬁnanced from abroad; or about the impact of cross-border capital ﬂows on domestic conditions.
Had the academic and policy communities understood the real causes of the crisis and dealt with them earlier, the crisis could have been averted or at least mitigated. Only if we understand the roots of the crisis and its likely evolution can we design an appropriate policy response to prevent a recurrence. 1 The world economy and the 2008–9 crisis The world economy grew rapidly between 2000 and 2008. Unemployment and poverty declined as advanced, emerging, and developing economies alike recorded high growth rates.
I propose replacing the system of national reserve currencies with a global reserve currency called “paper gold” (“p-gold”). 2 Each country’s central bank would use p-gold as its reserve currency and issue its domestic currency with a ﬁxed exchange rate against p-gold. P-gold would be used in international trade and capital ﬂows (as the US dollar is now). The increase in p-gold each year – global seigniorage – could be used to pay for the operating costs of the international monetary authority and for global public goods agreed on by all countries.