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System Malfunction
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System Malfunction

The Global Economy Is Rife with Imbalances that Cannot Be Fixed under the Present International Monetary (Non)System

William R. White
IMF, 2015
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Editorial Rating

9

Qualities

  • Eye Opening
  • Background
  • For Beginners

Recommendation

The pre–World War I gold standard and the post–World War II Bretton Woods agreement were the last exemplars of a globally coordinated monetary system. Today, countries pursue their own fragmented interests, such as by stimulating their economies with lowered interest rates, without regard to the impacts on other nations or on their own long-term interests. Economist William R. White explains how “the present international monetary (non)system” works against the good of the global economic community. getAbstract recommends this brief but worthwhile article to policy makers, who should heed White on the need for a new postcrisis monetary system.

Take-Aways

  • National monetary policies have led to potentially dangerous global imbalances that could spark future crises.
  • Current account imbalances are dangerously skewed, and investors’ “hot money” disrupts emerging markets’ more vulnerable economies.
  • The United States’ monetary easing to spur internal growth led to currency appreciations in other nations, especially developing countries, which then loosened their policies and promoted greater lending and indebtedness.

About the Author

William R. White is chairman of the OECD’s Economic and Development Review Committee.

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