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Global imbalances and the Revised Bretton Woods hypothesis: Wrong before the crisis and wrong after

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  • Thomas I. Palley

Abstract

This paper explores and contrasts the revised Bretton Woods hypothesis (BW II) with the structural Keynesian hypothesis. Whereas the former sees the growing global imbalances of the three decades prior to the financial crisis of 2008 as beneficial, the latter sees them as problematic and destructive of shared prosperity in the United States. Moreover, the U.S. economic relationship with China is viewed as especially problematic as it involves the largest bi-lateral trade deficit, and because it has also been a major source of investment diversion and manufacturing job loss. The paper's conclusion is the BW II analogy between today's global financial system and the original Bretton Woods system is without foundation, but it survives because the hypothesis helps rationalize and justify large trade deficits and the process of corporate globalization.

Suggested Citation

  • Thomas I. Palley, 2013. "Global imbalances and the Revised Bretton Woods hypothesis: Wrong before the crisis and wrong after," IMK Working Paper 108-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:wpaper:108-2013
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    References listed on IDEAS

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    3. Palley, Thomas I., 2009. "America's exhausted paradigm: Macroeconomic causes of the financial crisis and great recession," IPE Working Papers 02/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
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    6. Thomas I. Palley, 2011. "The Contradictions of Export-led Growth," Economics Public Policy Brief Archive ppb_119, Levy Economics Institute.
    7. Thomas Palley, 2007. "The Fallacy of the Revised Bretton Woods Hypothesis: Why Today's Global Financial System Is Unsustainable and Suggestions for a Replacement," International Journal of Political Economy, Taylor & Francis Journals, vol. 36(4), pages 36-52.
    8. Palley,Thomas I., 2013. "From Financial Crisis to Stagnation," Cambridge Books, Cambridge University Press, number 9781107612464.
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    More about this item

    Keywords

    Revised Bretton Woods hypothesis; Structural Keynesian hypothesis; global imbalances; U.S. trade deficit;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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