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The Fallacy of the Revised Bretton Woods Hypothesis

In: Neoliberalism and the Road to Inequality and Stagnation

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Abstract

The Revised Bretton Woods hypothesis was a popular explanation of global economic developments in the 2000s, including the large U.S. trade deficits. The argument was that the international financial system had structural similarities with the earlier Bretton Woods (1946 - 71) arrangements, whereby the U.S. ran large trade deficits that provided financial assets which greased and encouraged global economic growth. This chapter challenged that view and argued the system was actually headed for a crash (as happened soon after in 2008). The reasoning was simple. The U.S. boom and U.S. demand for imports were built on household debt. When household borrowing eventually faltered owing to either debt limits or self-imposed unwillingness to take on more debt, the system would crash, pulling down both the U.S. economy and the global economy.

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  • ., 2021. "The Fallacy of the Revised Bretton Woods Hypothesis," Chapters, in: Neoliberalism and the Road to Inequality and Stagnation, chapter 4, pages 49-65, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20890_4
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    Cited by:

    1. Shrestha, Gitta & Pakhtigian, Emily L. & Jeuland, Marc, 2023. "Women who do not migrate: Intersectionality, social relations, and participation in Western Nepal," World Development, Elsevier, vol. 161(C).

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