Gross domestic product. There was no other way, all the goods and services produced within the system could be sold. On 21 January a spectacular fall in share prices occurred in all major world markets, followed by a series of collapses.
And a financial panic is what we began facing the week of March 8. There emerged, however, much more complex and complicated ones during the last decade, such as financial instruments involving derivatives, forward contracts and hedging activities. For some, the losses represented by various toxic securities simply diminished their reserves and brought them down. In 2005, India and China formed a ‘strategic partnership’. After all, the swap lines mean that the Fed provides dollars on demand to its foreign counterparts—not something one would expect the “Make America Great Again” crowd to approve of. Thus, the continuing dominance of the U.S. dollar is not a matter of simple economics, but is also ‘deeply rooted in the geopolitical role of the United States.’(43)The central place that the U.S. now occupies in the global system rests on a particular convergence of structure and history. Consumer debt allowed many working families to maintain their standard of living to some extent. Modern agriculture makes heavy use of oil in a variety of ways. Both the US Federal Reserve and the Bank of England reacted, on both occasions, by cutting interest rates and encouraging lending. The Bretton Woods system was a natural expression of the global economic supremacy of the U.S. By the end of the war, the bulk of the world’s gold supply was held by the U.S. in Fort Knox, Kentucky, and the massive supremacy of U.S. industrial production guaranteed that it would enjoy huge surpluses in its balance of trade. It is 400% of GDP, the highest in the G7 by some margin. From 2000 to 2005, the rise in after-tax income was barely one third of the rise in home prices.29. Many observers also agree that the Chinese economy has a much bigger margin of maneuver, because its exposure to those speculative toxic assets, which lay at the root of the recent financial crisis, is much lower than the exposure of the American and West European economies. John Bellamy Foster, ‘The Household Debt Bubble’, 26.
China is currently the world’s sixth largest economy with an annual economic growth of more than nine percent. If investment falls below savings, a gap opens up between what has been produced and what is being sold.
Both India and China would become major power centres by 2015 even while remaining middle-income countries on account of their having the highest population in the world. The ideas contained in this section are drawn from B. Gokay, ‘How Oil Fuels World Politics’, in B. Gokay (ed), 91. Because of its large current-account deficit America has been heavily reliant on foreign funding. But they are staying for the quality, and they are investing for the innovation. (It was 3.5 % in the 1960s and 2.4 % in the 1970s)(23) One thing, which was essential in this partial recovery of the rate of profit in the 1980s and 1990s, was the increase of the share of total profits in total national incomes at the expense of wages.
The housing bubble of the early 2000s was contributed to by all of the from HIST 1112 at Clayton State University This situation was the ‘credit crunch’. (37) Where did this money come from? While the IMF expects a recovery in 2010, other forecasts believe that the recession will be more prolonged in certain countries, including the US and the UK. (45) This dominant role for the U.S. dollar in currency created at Bretton Woods was given particular power in association with a greatly expanded emphasis on direct foreign investment as the main form of capital export and international economic integration. On the upslope of the curve, there is the first oil, the oil closer to the surface, which is also called ‘cheap oil’ or ‘easy oil’, because it is easier and cheaper to take that oil out and also it is better quality (‘light’, low-sulphur oil, therefore cheaper to refine). Signs of external financing difficulties were evident.
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