Economist Stiglitz calls for new global reserve system

[Volitzer]

Economist Stiglitz calls for new global reserve system

BANGKOK (Reuters) - A new global reserve system is needed after the global financial crisis exposed the U.S. dollar-based system as flawed and risky, Nobel Prize-winning economist Joseph Stiglitz said on Friday.

The "dollar now is yielding almost zero return," Stiglitz said in a speech at the United Nations regional headquarters in Bangkok. "The current global reserve system is fraying. It's falling apart. The issue isn't whether we go to a new system. The question is do we do so in an orderly or disorderly way."

The build up of the U.S. deficit, debt and "the boiling up of the balance sheet" is cause for anxiety, he said.

Stiglitz urged rich nations to provide funds to help poorer countries avoid a steep crash during the financial crisis.

The group has called for global coordination to avoid competition to cut taxes, and for a worldwide increase in tax on high earners. Dubbing itself the "Shadow GN," the group has urged governments to opt for bank nationalizations rather than bailouts in order to drive the pace of fresh lending.

Stiglitz said a new global reserve system would be good for global aggregate demand, global stability and global equity.

"It's very hard to have a globally integrated financial system based on a single currency when there's such uncertainties about the economic fortunes of that particular country," he said.

(Reporting by Thin Lei Win. Editing by Jason Szep)

http://www.reuters.com/article/GCA-Economy/idUSTRE57K29120090821

© Thomson Reuters 2009 All rights reserved

[JonCatalan]

This is actually a topic I became very interested in after reading Joseph Stiglitz' book Making Globalization Work. I wrote a book review (How Not to Make Globalization Work (http://www.economicthought.net/2009/11/how-not-to-make-globalization-work/)) that was supposed to critique the idea of a global reserve currency, but I found that the paper would have been too long and that it would have taken too long to research the sufficient materials. The crux of the idea seems to revolve around the idea that countries with monetary trade deficits are in debt because of this fact, whilst this isn't true. A country can only publicly be in debt borrows money, and international trade does not within itself lead to this. In fact, by its very nature, there can be no deficit in trade, since both parties leave the transaction satisfied.

I think that Stiglitz supports a global currency system in the same exact sense that Keynes did, when he presented the idea at Bretton Woods. I have yet to preform the level of detailed research that I originally intentioned to do, but at the bare minimum there would be drastic stagnation in international trade, while it's very likely that this international currency would suffer from high inflation. I don't think an international currency would last very long (just look at the Euro; only eight years, and it already looks as if it will collapse [because of Spain and Greece, primarily]).

This thread topic got me re-interested in the topic!

[youngbuck]

Alex Jones has Joe Stiglitz on his show a handful of times. I guess this explains why he hasn't been on the show anytime recently. His predictions haven't been spot on, and his current predictions are questionable. Nonetheless, he's a Nobel prize winner (what does that mean anymore?) and his statements are likely worth something.

At the very least, I think his statements are indicative of what's to be expected in the future.

[JonCatalan]

At the very least, I think his statements are indicative of what's to be expected in the future.

Stiglitz can make some goods points; like I point out in my review, when it came to IP Stiglitz started on the right track. He then derailed his thought process completely, and instead of taking the libertarian approach he started off with, he ended the section by just suggesting more taxes and government intervention.

[Dunedain]

Stiglitz urged rich nations to provide funds to help poorer countries avoid a steep crash during the financial crisis.


More global welfare.

[Austrian Econ Disciple]

Stiglitz can make some goods points; like I point out in my review, when it came to IP Stiglitz started on the right track. He then derailed his thought process completely, and instead of taking the libertarian approach he started off with, he ended the section by just suggesting more taxes and government intervention.

I think Stephen Kinsella makes a very good case against IP. I don't bother with Neo-Classicals much, besides of course learning the ins and outs of their economic philosophy.

[JonCatalan]

I think Stephen Kinsella makes a very good case against IP. I don't bother with Neo-Classicals much, besides of course learning the ins and outs of their economic philosophy.

Well, why it's more incredible that Stiglitz seems to come to the conclusion that IP is not beneficial (although he quickly changes the subject) is because he's a Keynesian.