An Article Review on the Borrower of Last Resort...

An Article Review on: The Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel emergence of unregulated monetary mechanisms based on an explosion of private liabilities generated international liquidity in both periods. It also adds to explain the workings of the international monetary systems of the two periods which†¦show more content†¦In order to foster liquidity during the pre war period Britain act as the â€Å"lender of last resort† through borrowing short and lending long. London’s ability to â€Å"as the lender of last resort† was based on other countries’ willingness to hold pound liabilities. According to Rama the â€Å"gold standard† period of the international monetary system was able to weather the crises that did erupt. The inter war period was marked up by the deleterious trade wars. These underscored the fragility and contradictions of the international monetary system. With the weakening of the British dominance, they depended on the USA reconstruction and the significant US current account surpluses buttressed the growing dominance of the dollar in international settlements. But during this time the dollar was in shortage. In order for this to be solved principal surplus country USA would need to impart liquidity to the international monetary system, by taking on the role of financial intermediation that had underscored London’s role in the Gold standard period. But due to the fact that it was only the onset of the aftermath of the war the USA is not yet ready to do the role. This gave birth to the Bretton Woods conference which sought to weld a new international monetary order under the joint initiative of Engl and and USA. The post war world was marked by the emerging dominance of the US dollar as a key currency. SinceShow MoreRelatedAn Article Review on: the Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan1319 Words   |  6 PagesAn Article Review on: The Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel An Article Review on the Borrower of Last Resort... An Article Review on: The Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel emergence of unregulated monetary mechanisms based on an explosion of private liabilities generated international liquidity in both periods. It also adds to explain the workings of the international monetary systems of the two periods which seeks†¦show more content†¦A country’s dominance in world trade, its status as the leading creditor and exporter of capital, initially underwrites its emergence as international money. The use of the currency of a country as the international reserve was both a logical outcome and a necessary basis of the development of capitalist internationally and the tremendous concentr ation of capital and trade flows in the hegemonic country. However, the perpetuation and preservation of its dominant role does not depends on its continued ‘creditor’ status but rather on its ability to attract and recycle capital from the rest of the world, while incurring a growing debt burden. It has to be the ‘borrower of last resort’. The imperative of maintaining international liquidity and maintaining sufficient global reserves depends on the ability of the country issuing the international money to sustain a deficit without eroding its status as a reserve currency. Like what England and USA did during the â€Å"gold standard† period for England and the dollar period for the latter. Acting as the lender of last resort was not enough for a country with the international currency to maintain liquidity and adjustment but rather on its ability to borrow from surplus countries on one hand and pass the burden of deflationary adjustment shocks to p eripheral debtor countries on the other or act as the â€Å"borrower ofShow MoreRelatedAn Article Review on: the Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan1334 Words   |  6 PagesAn Article Review on: The Borrower of Last Resort: International Adjustment and Liquidity in Historical Perspective* Ramaa Vasudevan According to the author Ramaa Vasudevan the article was aiming to compare and contrast the actual workings of the international l monetary arrangements in the two periods, Britain during the period of the international gold standard and USA after post war period. The pyramiding if official liabilities on a disproportionately small reserve base and the parallel