Financial Marriage of Convenience between China and the US: Sustainability of Dollar – Wall Street Regime in the Post-2008 Crisis

Financial Marriage of Convenience between China and the US: Sustainability of Dollar – Wall Street Regime in the Post-2008 Crisis

Oguz Dilek (Zirve University, Turkey) and Emre Iseri (Kadir Has University, Turkey)
Copyright: © 2013 |Pages: 17
DOI: 10.4018/978-1-4666-3006-2.ch013

Abstract

Despite growing global concerns regarding the reliability of the American economy in general and the Dollar as a Negotiated Currency in particular, US-shaped regime of international finance will survive the present difficulties. This is mainly due to the fact that China would be predisposed to maintain its backing of the US Dollar, not to harm it, because it staked a massive economic and political capital in that. Beijing has so far persisted in assisting the global value of the US Dollar (sacrificing considerable sums of economic return), which is an apt move to beef up the American domestic market with the intention of keeping Chinese factories busy at all times.
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Background

All utile currency units, without fail, possess themselves of these three inherent qualities: as an account unit, a medium for transactions and a store of value. By each of these three standards of measurement, the US Dollar has remained on its towering place within the global financial structure from the end of the WW II. To all intents and purposes, however; the financial turbulences in aftermath of 2008 have pushed many into a state of suspense about the future of the Dollar’s pride of place as a fiat currency. Sourcing from a set of economic, as well as political pulses, China has become the anchor of support for a drastic refashioning of what Peter Gowan (1999) calls as Dollar-Wall Street regime (pp. 19-39). If the current trend holds, the US Dollar will soon surrender to the contender currencies (RMB or Euro), sharing the same fate with the British Pound within the inter-war era. No matter who occupies the commanding heights of the international financial structure, in the upcoming decades, such prominence will give birth to, and also result from, a substantial political clout over the course of international system (Eichengreen, 2005).

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