An Article Review on: the Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan
An Article Review on:
The Borrower of Last Resort:
International Adjustment and Liquidity in Historical Perspective*
According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel emergence of unregulated monetary mechanisms based on an explosion of private liabilities generated international liquidity in both periods. It also adds to explain the workings of the international monetary systems of the two periods which seeks
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It aims that Britain would dismantle the system of imperial preference and the dollar pool arrangements that had been instituted in the inter-war period since it was seen to be discriminatory. By 1958, the post war dollar shortage had been transformed into a dollar glut through the post war reconstruction plans for Europe and Japan, and subsequently by the program of rearmament and military aid. The closing of the gold window in 1971, and the subsequent ‘floating’ of the dollar, did not result in the displacement of the dollar as the international reserve currency. Instead, developments in the international monetary arrangements in the past three decades enabled the preservation of the role of the dollar as an international reserve. The special position of the USA, with the dollar serving as a international reserve currency, allowed it to follow a policy of what was called ‘benign neglect’, and the burden of financing its current accounts deficit, came to rest on foreign investors. This role came to be played increasingly by private investors in the offshore markets. With the massive growth of this offshore market signaled the decisive shift away from the restrictive Bretton Woods system. It also foreshadowed the concerted advocacy of financial openness and the integration through the nineties, in the interests of preserving dollar hegemony.
The two major phases of ‘globalization’- the first under the