The U.S. supremacy in the age of high finance: expansion and crisis

Click here to access article by Maria Alejandra Madi from the World Economics Association Pedagogy Blog.

In the post-war boom era of 1945 to 1971, the U.S. surplus was at the center of the global economic order. Throughout the Bretton Woods period, the United States recycled part of its surplus via foreign direct investment – mainly in Western Europe and also in Japan. Within the system of international economic flows, the U.S. exported goods to the rest of the world and also finance these purchases.  Besides, the United States created demand for the exports of  foreign countries, primarily Germany and Japan.

After the 1970s, this system of international economic flows changed.

And she continues on to explain how the system changed and its consequences.

...the maintenance of the U.S. supremacy requires global permanent unbalances. Consequently, the current global surplus recycling mechanism could not stabilize the world economy.

As the fundamental structural flaws in the global economy have not been addressed since the 2008 financial crisis, there are serious concerns that a new global economic crisis of unprecedented magnitude could still happen.