PKT message, World Monetary Reform

Henry:

Let me respond to your statement ---

There is an urgent need to restructure the global finance architecture
to return to exchange rates based on purchasing-power parity, and to
reorient the world trading system toward true comparative advantage
based on global full employment with rising wages and living standards.
The key starting point is to focus on the hegemony of the dollar. ---

with a bird's-eye view of what I perceive to be

(a) the root cause of 'dollar hegemony' and, therefore,

(b) the starting point for reforming the global financial architecture.

'Dollar hegemony', which I take to be short-hand for post-Bretton Woods world monetary arrangements, was born of an aggressive form of Finance Capitalism operating in an accommodating - to the point of subservience - political and intellectual environment; it is an offspring of "vested interests" dressed up as "ideas" by revolving-door political and academic opportunists.

It is not by accident that I invoke these images from the final paragraph of Keynes' General Theory - "...in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil."

For, having let "technical monetary details fall into the background" in the General Theory, Keynes left contemporary "agitators" against Globalization in general and 'Dollar Hegemony' in particular to fend for themselves insofar as the "technical monetary" aspects of the problem are concerned. In this respect, as noted in a recent message, academic critics of the interest rate and fiscal policy components of IMF "stabilization programs" fail to recognize their own handiwork therein.

I conclude, therefore,

(a) that the starting point for reforming the global financial architecture resides in "technical monetary details";

(b) that the "technical" nature of the subject matter places it beyond the reach of the empiricism which informs most (if not all) contemporary academic work on monetary economics; and

(c) that "technical monetary details" must be addressed through an analytical approach akin to that used by Keynes in all his work on monetary issues before the General Theory.

Gunnar