POSC 3250 Lecture Notes - Lecture 8: Gold Standard, World Currency, Seigniorage
29 Mar 2016
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Document Summary
Seignorage: beneits that go to the issuer of a currency (us) By being a global reserve currency, us got beneits of seignorage. American irms get to do internaional business in usd. No fear of adjustment in exchange rate. Liquidity vs conidence- triin dilemma one currency over the long term can"t provide both liquidity and conidence. Major contribuion to the downfall of the system. System required us to run capital account deicits. Other countries take advantage (west germany and japan) Trade and converibility problems: growth of short term inancial lows/eroding of capital controls (1970s, eurocurrencies / euromarkets / eurodollars increased pressure on ixed exchange rates. Us and britain opted to abandon economic controls: major debate in ipe. Collapse: french atack on us hegemony (liquidity vs conidence, 1970s us current account deicit- us needed to adjust (needed depreciaion, nixon shocks (1971) Current managed loaing system is confused- management problems.
