The International Monetary (Non-)Order and the 'Global Capital Flows Paradox'

Levy Economics Institute Working Paper No. 531

31 Pages Posted: 28 Apr 2008

See all articles by Jörg Bibow

Jörg Bibow

Skidmore College - Department of Economics; Bard College - Levy Economics Institute

Date Written: April 25, 2008

Abstract

This paper sets out to investigate the forces behind the so-called global capital flows paradox and related dollar glut observed in the era of advancing financial globalization. The supposed paradox is that the developing world has increasingly come to pursue policies that resulted in current account surpluses and thus net capital exports - destined primarily for the capital-rich United States. The hypothesis put forward here is that systemic deficiencies in the international monetary and financial order have been the root cause behind today's situation. Furthermore, it is argued that the United States' position as issuer of the world's premiere reserve currency and supremacy in global finance explain the related conundrum of a positive investment income balance despite a negative international investment position. The assessment is carried out in light of John Maynard Keynes's views on a sound international monetary and financial order.

Keywords: International Monetary Order, Global Imbalances, Capital Account Convertibility

Suggested Citation

Bibow, Jörg, The International Monetary (Non-)Order and the 'Global Capital Flows Paradox' (April 25, 2008). Levy Economics Institute Working Paper No. 531, Available at SSRN: https://ssrn.com/abstract=1125462 or http://dx.doi.org/10.2139/ssrn.1125462

Jörg Bibow (Contact Author)

Skidmore College - Department of Economics ( email )

Saratoga Springs, NY 12866
United States

Bard College - Levy Economics Institute ( email )

Blithewood Rd
Annandale on Hudson, NY 12504
United States