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Sooner or later, it's a losing proposition, especially in today's climate with the Federal Reserve sacrificing dollar strength to bail out Wall Street and trying to keep long rates low to contain borrowing costs. Yet the greater the dollar erosion, the more losses foreign investors will incur and less likely they'll tolerate more by buying bad assets.
So far, however, they're still recycling their dollar inflows to fund America's budget deficit and global militarism - something Hudson calls a "Free Lunch in the form of compulsory foreign loans to finance US Government policy."
Even so, they have no say over US policies, yet America and international lending agencies, like the IMF and World Bank, "use their dollar claims" on indebted nations to enforce Washington Consensus diktats. Independent-minded states face sanctions, isolation, coups or wars if they refuse.
Until Nixon closed the gold window in August 1971, America couldn't run unlimited balance-of-payments deficits. However without gold convertibility, it's continued for nearly 40 years along with protectionist policies through generous subsidies to US exporters - most notably to agribusiness. As a result, Hudson sees international tensions growing for the next generation, perhaps even greater now given America's reckless monetarism and perpetual wars.
His book "provid(es) the background for US - European and US - Asian financial relations by explaining how (post-1971) the US Treasury-bill standard came to provide America with a Free Lunch." Also how the IMF promoted debtor nations' capital flight and the World Bank supported "foreign trade dependency on US farm exports...."
The early 1970s dollar crisis and balance-of-payments deficits seem small compared to today. Yet the "Treasury-bill standard (frees) the US economy from (doing) what American diplomats (force on) other debtor nations (with) payments deficits: impose austerity to restore balance in its international payments. The United States alone has been free to pursue domestic expansion and foreign diplomacy with hardly a worry about the balance-of-payment consequences." No other nation has that luxury.
Post-WW II, Washington made other countries dependent on America, something it eschewed after WW I, staying isolationist instead to pursue internal development.
In the 1970s, emerging nations proposed a New International Economic Order (NIEO) through the UN Conference on Trade and Development to promote their own trade and other concerns. It "originated as a response to America's aggressive world economic diplomacy, and how US strategy has provided other nations with a learning curve that they may follow in pressing their own national and regional interests."
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