Lesson: 11 | 12| 13 | 14 | 15 | 16| 17 | 18| 19 | 20

US Dollar Trade Deficit and Capital Markets Dollar Trade Deficit and Capital Markets : Continued

The Almighty US Dollar

U.S. Hegemony and the Capital Markets

The world in the opening years of twenty-first century is much different from that of a century before.

At the fall of the British Empire, the United States was ready in the wings to assume leadership, being reluctantly dragged from isolationism.

None of today’s potential candidates for world leader – the European Union, Japan, China, India, Indonesia, Brazil, or Russia – has the combination of entrepreneurial spirit, ethical capitalism, technological inventiveness, political stability, favorable demographics, and business-friendly environment that the United States had in the early twentieth century.

China may emerge as the new world leader

China, with its massive population, political will, and drive towards industrialization and global trade, may emerge as the world leader.

The impact of the decline of American imperialism and the loss of the dollar franchise on the U.S. capital markets seems evident:

However, the future is unknowable and history never repeats.

If the United States falls as the world’s super-power, it could be that there will be no replacement.

Instead, we may see an evolution into a type of world government not yet perceived – the natural outcome of globalization, multi-national treaties, computer technology, and the Internet.

A time of renewal and a new awakening is also possible.

Post Baby-Boomer generations in America may reject the ways of their parents, rethinking national purposes, sparking a reformation with brave new ideas.

However, for purposes of Capital Flow Analysis, the important point to note is that the American securities market is heavily dependent upon the continued growth of the trade deficit and that, as yet, the dollar franchise is still strong.


Before proceeding, check your progress:


If the dollar is no longer the leading international currency, the results might include:
Choice 3Reindustrialization of the United States.
Choice 1Easier consumer credit for Americans.
Choice 2A lowering of domestic interest rates.
Choice 4An improved U.S. standard of living.
Eliminating the trade deficit and the hegemony of the U.S. dollar is likely to effect the U.S. stock market as follows:
Choice 1Stock prices will increase dramatically.
Choice 2Stock buybacks will accelerate.
Choice 3Price earnings ratios will fall.
Choice 4Foreigners will rush to buy U.S. stocks.
Based on historical precedent, the United States may expect to remain the world super-power for:
Choice 3 One thousand years.
Choice 1 For at least five generations.
Choice 2 It is impossible to say.
Choice 4 No more than five years.

Investment Theory: Capital Flow Analysis   Exogenous Variables : continued >

Lesson: 11 | 12| 13 | 14 | 15 | 16| 17 | 18| 19 | 20

Suggested Reading about the trade deficit, the US dollar, and capital markets
"The Chastening: Inside the Crisis that Rocked the Global Financial System and Humbled the IMF", Paperback, Paul Blustein

In the Asian Crisis of 1997, the IMF and Treasury Secretary Robert E. Rubin demonstrate monumental incompetence and misunderstanding of the world financial system.

"The Power of Gold: The History of an Obsession", Paperback, Peter L. Bernstein

Before the era of the almighty dollar, the world ran on a "gold standard". This history of gold is useful in any investment library.

"Empire: The Rise and Demise of British World Order and the Lessons for Global Power", Hardcover, Niall Fergusonstar

In 1900, London was the world financial center. The fall of the British Empire is relevant to Americans today. The information in this excellent history is useful for Capital Flow Analysis.

"Is the U.S. Trade Deficit Sustainable?", Paperback, Catherine L. Mann

Much of America's prosperity is financed by the trade deficit. This books goes into how long this can continue.

"The Dollar Crisis: Causes, Consequences, Cures", Hardcover, Richard Duncan

The world cannot afford to ignore the lessons of Asian and Latin American financial crises - and Japan's malaise - as an even greater economic threat looms.

"Goodbye America!, Globalization, Debt, and the Dollar Empire", Paperback, Michael Rowbotham

The mechanisms pushing the Third World into poverty are also deferring U.S. retirement plans and pushing America's children into debt.

"The Dollarization Debate", Paperback, Dominick Salvatore, James W. Dean, Thomas W. Willet

With the collapse of the former Soviet Union, and the formation of the euro in Europe, many countries and debating whether or not a common currency is in their best interest.

"The Lexus and the Olive Tree: Understanding Globalization", Paperback, Thomas L. Friedman

The complexities of globalization in plain language.

"Manifesto for a New World Order", Hardcover, George Monbiot

Pointing out the anti-democratic aspects of globalization, Monbiot offers utopian solutions.

"Alternatives to Economic Globalization", Paperback, John Cavanagh, et al.

Written by a premier group of thinkers from around the world, this book is the defining document of the antiglobalization movement.

"George Soros on Globalization", Hardover, George Soros

One might hardly care what this ego-maniacal speculator thinks, except that he is willing to spend millions of dollars to support the Democrat Party and may someday influence American foreign and economic policy.

"The Blood Bankers: Tales from the Global Underground Economy", Hardcover, James S. Henry, Bill Bradley

Former Chief Economist for McKinsey & Co. analyzes a range of scandals, including the looting of the Philippines by the Marcos family, corrupt lending in South America, and the financing of Al Qaeda. The dark side of globalization.

"Whose Trade Organization? A Comprehensive Guide to the World Trade Organization", Paperback, Lori Wallach, Patrick Woodall, Ralph Nader

A Handbook for Activists.

"The Political Economy of the World Trading System: From GATT to WTO", Paperback, Bernard Hoekman, Michael Kostecki

A full study of WTO and GATT.

"50 Years Is Enough: The Case Against the World Bank and the International Monetary Fund", Paperback, Kevin Danaher

What people have been shouting about in Seattle and beyond.

"Global Capital Flows: Should They Be Regulated?", Hardcover, Stephany Griffith-Jones

Forward by Nobel Laureate, James Tobin

"Capital Flows and Financial Crises", Paperback, Miles Kahler

A study of financial crises in Pacific-Asia, Latin American, and Eastern Europe during the 1990s.

"Downsizing in America: Reality, Causes, and Consequences", Hardcover, William J. Baumol, Alan S. Blinder, Edward N. Wolff, Julian N. May

Downsizing impacts mainly the less-educated, without improving productivity

"In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity", Hardcover, Eamonn Fingleton

An effective debunking of post-industrial theories.

"Open World: The Truth About Globalization", Hardcover, Phillippe Legrain

Examples of globalization's positive effects on global labor and environmental standards and its role as a lubricant for democracy.

"American Empire: Roosevelt's Geographer and the Prelude to Globalization", Hardcover, Neil Smith

Isaiah Bowman, the most famous American geographer of the twentieth century, was present at the creation of U.S. liberal foreign policy and a key "architect of the United Nations."

"Denationalization of Money: The Argument Refined", Friedrich A. Hayekstar

Nobel laureate F. A. Hayek makes a powerful case that government involvement in providing a medium of exchange (money) is neither necessary nor beneficial. In fact, government provision of currency is a threat to both liberty and financial stability.

"World Regions in Global Context", Hardcover, Sallie A. Marston, Paul L. Knox, Diana M. Liverman

An explicitly global approach to world regional geography that examines the interconnections between people and places at different scales.

"Good Money, Part II, The Standard", Hardcover, Friedrich A. Hayek star

Hayek make what was perhaps his most controversial proposal: that governments should be denied a monopoly on the coining of money.

Works of Friedrich A. Hayek
Work of Ludwig von Mises
"On a Clear Day I Can See Armageddon: The Collision of Israel, Islam, and Oil", Paperback, Charles L. Campbell

The historical events that have led to America's Middle Eastern Achilles' heel and a blueprint for necessary military and political actions.

"The Rebel Within: Joseph Stiglitz and the World Bank", Paperback, Joseph E. Stiglitz, Ha-Joon Chang

Nobel Laureate Stiglitz's stinging attack on the IMF and the World Bank.

"Anti-Americanism", Hardcover, Jean Francois Revel

A Frenchman seeks to explain the root cause of the world's and particularly Europe's obsession with hating America.

"City Bankers: 1890-1914", Hardcover, Youssef Cassis

A detailed analysis of the banking community of London when the City was the undisputed financial center of the world.

"Black Death: AIDS in Africa", Hardcover, Susan Hunter

Africa is home to 80 percent of the 40 million people in the world currently infected with HIV.

"The Decline and Fall of the American Empire", Paperback, Robert Murray

The fall from grace of the greatest power on earth since ancient Rome is recounted with parallel and politically correct references to the analog of ancient Rome.

"The Rise of Modern China", Paperback, Immanuel C. Y. Hsu

One of the most popular textbooks on this subject in universities across the country.

"Offshore Outsourcing: Business Models, ROI, and Best Practices", Hardcover, Marcia Robinson, Ravi Kalakota

Offshore outsourcing as a corporate strategy will impact on flow of funds accounts.

"In Defense of Globalization", Hardcover, Jagdish N. Bhagwati

A leading economist and former adviser to the U.N. on globalization defends the process.

"Globalization and Its Discontents", Paperback, Joseph E. Stiglitz

Stiglitz, a Nobel Prize winner and Columbia University economics professor, sees globalization's unrealized potential to eradicate poverty and promote economic growth.

"World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability", Paperback, Amy Chua

Yale Law Professor Chua shows how globalization has created a volatile concoction of free markets and democracy that has incited economic devastation, ethnic hatred and genocidal violence throughout the developing world.

"In Defense of Global Capitalism", Johan Norberg, Roger Tanner, Julian Sanchez

A systematic rebuttal to the claims of the anti-globalization movement, with facts, statistics, and graphs.

"Has Globalization Gone Too Far?", Paperback, Dani Rodrik, Robert Z. Lawrence, Scott Bradford

An economist points to the benefits-and risks-of international economic integration, and criticizes mainstream economists for downplaying its dangers.

"The Case Against 'Free Trade': GATT, NAFTA, and the Globalization of Corporate Power", Paperback, Ralph Nader, William Greider, Margaret Atwood, David Phillips, Pat Choate

A collection of liberal commentary against free trade and globalization.

"Unholy Trinity: The IMF, World Bank, and WTO", Paperback, Richard Peet

Professor Peet provides intellectual heft to the placards of anti-globalization protestors.

"The Globalization of Poverty: Impacts of IMF and World Bank Reforms", Paperback, Michael Chossudovsky

An economist's realistic view of mismanagement by the World Bank and the IMF.

"The Vandals' Crown: How Rebel Currency Traders Overthrew the World's Central Banks", Hardcover, Gregory J. Millman

How currency options and other derivatives threaten the international monetary system.

International Financial Statistics (monthly)

Standard source of data on international finance and capital flows from the International Monetary Fund

"A Town Abandoned: Flint, Michigan Confronts Deindustrialization", Paperback, Steven P. Dandaneau

The consequences for local communities of the internationalization of American business.

"And The Wolf Finally Came: The Decline of the American Steel Industry", Paperback, John P. Hoerr

A study in the pain of deindustrialization

"The Ruthless Economy: Work and Power in the Digital Age", Hardcover, Simon Head

Factors in wage inequality, job insecurity, and the application of Taylorism to the service economy.

"Global Shift: Reshaping the Global Economic Map in the 21st Century, 4th Edition", Paperback, Peter Dicken

There has been a fundamental redrawing of the global economic map. Dicken identifies states and transnational corporations as the two key actors in the multiple processes of restructuring and institutionalization of the global economy.

"Free Trade Under Fire", Paperback, Douglas A. Irwin

An economist presents the arguments in favor of free trade.

"The Race To The Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards", Paperback, Alan Tonelson

A well-researched and politically savvy treatise that goes beyond criticism to propose thoughtful economic alternatives that may enable expanded free trade without imposing more burdens on American labor

"Behind the Scenes at the WTO: The Real World of International Trade Negotiations", Paperback, Fatoumata Jawara, Aileen Kwa

A disturbing picture that contradicts commonly held assumptions about the WTO.

"U.S. International Competitiveness: Evolution or Revolution?", Hardcover, John C. Hilke, Philip B. Nelson

Argues that deficit growth is primarily due to unfair foreign trade practices, overzealous antitrust laws, slack U.S. management, and other microeconomic factors.

"The Dollar Hegemony: Dollar, Dollarization, and Progress", Paperback, Jean Gabriel

The hegemony of the dollar is undeniable. Who profits by it, and who is harmed by it?

"World Commodities and World Currencies", Hardcover, Benjamin Graham [Out of Print]

Graham maintains that stabilization of commodities offers a comparatively simple technique by which the world could achieve the fourfold objective of foreign-exchange stability, reasonable price stability, protective stockpiles, and - most importantly - a balanced expansion of the worlds output and consumption of useful goods.

Works of Benjamin Graham

Global Garbage: Exporting Trash and Toxic Waste (An Impact Book)

"The Ultimate Terrorists", Paperback, Jessica Stern

A former National Security Council staffer, explains with chilling lucidity why it is becoming more likely that those threats will materialize into a major terrorist incident featuring a weapon of mass destruction.

Perpetuating Poverty: The World Bank, the IMF, and the Developing World", Hardcover, Doug Bandow

An expose of the scandalous record of the World Bank and IMF.

"Rudyard Kipling: Complete Verse", Paperback, Rudyard Kiplingstar

A wonderful book. The only complete set of Kipling verse in paperback.

"The Reluctant Superpower: United States Policy in Bosnia, 1991-95", Hardcover, Wayne Bert

Analysis the nature of the wars in the former Yugoslavia, limited security interests vs. strong humanitarian interests in Bosnia, and misperceptions by leaders and citizens in the U.S. and Europe.

"The Illustrated Rise and Fall of the British Empire", Hardcover, Lawrence James

A sweeping survey of England's imperial experience from 1600 to the present, with attention given to the greed and arrogance of the Empire and its achievements.

"Africa's Armies: From Honor to Infamy", Paperback, Robert B. Edgerton

The post-colonial civil wars that have devastated much of sub-Saharan Africa - catastrophes marked by genocide, famine, disease, economic collapse, and steadily declining life expectancy.

"The Rise of China (International Security Readers)", Paperback, Michael E. Brown

Essays examining the issues surrounding the rise of China as a world political and military power.

"Interpreting China's Grand Strategy: Past, Present, and Future", Paperback, Michael D. Swayne, Ashley J. Tellis

The significance of China's emergence for the United States and the global community.

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