The Middle Income Trap
Robert Mundell
Columbia University
May 6, 2011
ADB Conference
Hanoi, Viet-Nam
Extracted from pg.15:
Date------------System-------------Reserve Asset-------Leaders
1803-1873---Bimetallism-------Gold & Silver--------France, Britain.
1873-1914---Gold Standard------Gold and £---------Britain,
1915-1924---Anchored $ St.----Gold and $----------U.S., Britain, France
1924-1933---Gold Standard-----Gold,$ and £--------US, UK, France
1934-1971---Anchored $ St.----Gold and $----------U.S., G-10, Britain
1971-1973---Dollar Standard---$------------------------U.S.
1973-1985---Flex. Ex. Rates---$, DM, £-------------U.S., Germany, Japan
1985-1999---Man. Ex. Rates----$, DM,--------------U.S., G-5, IMF
1999-2011---Dollar and Euro---$, €, ¥,---------------U.S, EMU, IMF
2011-?-------Currency Areas----$, €, ¥, £, C¥,-------US, EMU, China
[MRT: adding a possible scenario
2014-?---Freegold---GOLD + SDR as complementary reserve---EMU,Ch,SA,In/ All]
---
Some great parts from which I quote:
Part: The International Monetary System
Re-Forming an International Monetary System
• For most of world history there has been an international monetary system to which countries could belong...
• That broke down in 1971.
The Dollar
• The Dollar took over from Gold as the principal international money in the inter-war and post-war periods.
• The Bretton Woods System of fixed exchange rates tied to the convertible dollar broke down in 1971.
• Since then the dollar as continued as the closest thing to a world currency there is, but less so as time passed.
Dollar Less Effective Because of the Rise of the Euro
• Already in the late 1970s with the formation of the EMS in Europe a competing currency area was forming around the DM.
• The creation of the euro in 1999 confirmed that split.
• The Dollar no longer represents the mainstream of the world economy.
Split in the Mainstream
• The IMS is less effective now because there are two world currencies, the dollar and the euro.
• It would not be so bad if the exchange rates were fixed or fluctuating within small margins, but the dollar-euro market gyrates like a casino.
• Poor management by the Fed, ECB and the IMF!
...
Effect on Asia
• If reform cannot be achieved, Asia should go ahead, as Europe did, with forming its own Asian Monetary System.
...
The SDR
• The SDR was a good idea when it was created as a value of gold, but it has become not much more than a toy since 1974.
• As long as the dollar-euro rate fluctuates wildly, there can be no international monetary system.
• Basic reform would have to stabilize the Dollar-Euro Rate
& more...
Source: Monetary standards, pg 15
[Mrt: Lets be realist about where we are]
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