Global Macroeconomic Adjustment and International Monetary Power

In the previous chapters I have examined the monetary power of the United States, EMU member states and China behind the background of rising current account imbalances. I have argued that the rise of the global imbalances was mostly a manifestation of US structural monetary power, which allowed the United States to adopt a finance-led growth regime in which the Federal Reserve’s accommodating monetary policy played a prominent role: monetary expansion not only fueled the US trade deficit by encouraging an expansion of credit and asset price inflation in the US economy; it also fueled private capital flows to EMEs, which were mostly recycled by their central banks as dollar accumulation. The Eurozone played a negligible role in the generation of global demand in the years preceding the global financial crisis (GFC): I showed that the EMU’s non-accommodating macroeconomic governance regime strengthened the autonomy of the region’s CMEs to pursue export-led growth and run persistent and — especially in the case of Germany — increasing trade surpluses at the same time as undermining the external competiveness of the MMEs and forcing these countries to run increasing trade deficits. Finally, I argued that China’s rising foreign exchange reserves fueled a growing imbalance between corporate investment and household consumption in its growth regime by entrenching the influence of the SOE sector in the domestic political economy, thereby constraining China’s autonomy to reduce its external monetary dependence by rebalancing growth and making its support of the dollar even more ingrained than existing accounts of its entrapment have suggested.