The United States

Since 1971 the position and standing of the US in the world financial economy has changed enormously and at the time of writing (1979) further significant changes are underway. Many themes interrelate over this period. These are the continuing developments from the vast investment by American multinational companies around the world, the internationalisation of the major American banks and the role of the dollar as a reserve currency, the main intervention currency, and the ‘world’ currency in the euromarkets. The capital account of the balance of payments has shown significant changes with the abolition of controls on financial investment from the US, the much increased borrowing in the American domestic market by certain traditional foreign borrowers, such as Canada, and massively increased foreign central bank holdings of American government securities stemming from the recent imbalances in countries’ external accounts. Internal debate on the correct formulation of financial policy has been resolved in favour of broadly monetarist ideas, but these have been supplemented twice in this period by controls over wages and prices. The Americans may be attempting to transfer various international financial transactions from foreign countries back to the US — in particular, back to New York. The underlying momentum for the changes in these various fields stems from the evolution of American economic history itself over this period, as this has set the conditions for the operation of the financial markets and has allowed or impeded, as the case may be, the continuance or formation of new financial policies. In particular there has been a structural deterioration in the American economy with declining investment and productivity growth and growing dependence on imports, not least for energy.