Home / Knowledge / News / 'Free wheeling dollar root cause of crisis' - Research Expert
'Free wheeling dollar root cause of crisis' - Research Expert
17
Dec '08
Addressing the Chinese Annual Meeting of Finance – 2009, Wu Jinglian, a senior research fellow at the Development Research Center of the State Council and a professor at the Graduate School of the Chinese Academy of Social Sciences and China Europe International Business School expressed his views on the current economic crisis affecting China and the world at large.

He said that “Financial crisis is a crisis in the world financial system, but its source arrives from the formation of a new world monetary system after the collapse of the Bretton Woods system in 1976. The new system is characterized by making the unfettered U.S. dollar as the center of the monetary system.

In the Bretton Woods system, national currencies were pegged to the dollar and the dollar linked to gold, but under the new dispensation, the U.S. dollar is not linked to the gold, so it is a free-wheeling world currency.

There is the problem of low savings rate within the United States. The US is dependent on the status of U.S. dollar to borrow money globally and issues a variety of derivative tools for the same. The US maintains an efficient operation by using its currency and a wide range of financial instruments to borrow money from the world.

In this way, a virtual bubble waiting to be burst has been created not just in the US but across the world. But now the bubble has burst, leading to a sudden evaporation of virtual wealth, which turns a country from short-term liquidity surplus to a state of liquidity shortage. This is the source of the crisis.

Second, China's own financial system has huge flaws. There is a crisis of excessive savings and over-investment and the root cause of financial system defects are caused by excessive investment. China has maintained large-scale exports to support China's economic growth by introducing a set of policies to encourage exports.

It was successful in the 1990s. But after these many years these export-oriented policies have significantly increased foreign exchange reserves of China, which has led to China's economy and the U.S. economy complementing each others economies. It has also been proposed to establish a new monetary system, but we cannot quickly establish a monetary system in the short term that does not focus on U.S. dollar.

If we want to change the situation in the future, at least the main issues and status of the U.S dollar should be put under supervision. The biggest problem is that if we do this, Americans must change their way of life by generating high reserves. We need to create a new monetary system, but I am more pessimistic towards reaching a consensus of putting currency issue under supervision system in the near future.

In this case, China must change current growth pattern by relying more on domestic sales rather than exports and we should push the change of GDP development pattern through further reform.”

Fibre2fashion News Desk - China


Must ReadView All

US merchandise trade with India, 2012–16; Courtesy: USITC

Textiles | On 27th Jul 2017

India becomes US’ 9th largest trading partner in 2016

In 2016, India became the United States’ 9th-largest single-country...

Textiles | On 27th Jul 2017

GST will lead to further increase of MMF prices

The Goods & Services Tax (GST) rolled out on July 1, 2017 is not...

Textiles | On 27th Jul 2017

Global yarn production improved 30% q-o-q in Q1: ITMF

In the first quarter of 2017, global yarn production rose by almost...

Interviews View All

Luke Otten
Wigwam Mills Inc

Wigwam aims to recycle discarded yarn that doesn’t make it through the...

Sunil Kumar Sharma
Loknayak JPNSSSG Ltd

'The blend of cotton–linen yarn has high demand in the domestic and...

Mohammad Mamun Ar Rashid
UL VS Bangladesh Ltd

Productivity, creativity and innovation play a vital role in the growth of ...

Urs Stalder
Sanitized AG

Urs Stalder, CEO, Sanitized AG, talks about the increasing use of hygiene...

Ashok Desai
Bombay Textile Research Association

Bombay Textile Research Association (BTRA) is a leading name in textile...

Mohammad Hassan
Biax Fiberfilm

About one in every 20 patients picks up an infection while hospitalised....

Igor Chapurin
Chapurin

"Now we can see the Russian trend in international fashion. And Russian...

Sanjukta Dutta
Sanjukta's Studio

<b>Sanjukta Dutta</b> creates unique garments by clubbing prints of...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

July 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Thanks for your valuable feedback. Claim your free latest sustainability e-book.


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search



X