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The Global Recession Risk

In: Government Intervention in Globalization

Author

Listed:
  • Carlos M. Peláez
  • Carlos A. Peláez

Abstract

The world economy is threatened with recession by the debt/dollar crisis. The dollar problem originates in the fact that the US has been absorbing two-thirds of world savings to finance its deficit in current account. The dollar has to devalue, cheapening exports with which to reduce the trade deficit. The debt problem was caused by the lowering by the Fed of the fed funds rate to 1 percent in 2003–4, which encouraged excessive investment in residential construction. The US economy has to reallocate its resources to producing goods for exporting. The CAD as percent of GDP began in 2007 its first decline since 1997. Several sections consider the US external deficit, the trigger of the debt crisis, the need of repairing the international financial system and the ominous threat of regulatory, trade and exchange wars.

Suggested Citation

  • Carlos M. Peláez & Carlos A. Peláez, 2008. "The Global Recession Risk," Palgrave Macmillan Books, in: Government Intervention in Globalization, chapter 11, pages 167-181, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-22834-4_12
    DOI: 10.1057/9780230228344_12
    as

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