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The Global Recession Risk

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The Global Recession Risk

Dollar Devaluation and the World Economy

Palgrave Macmillan,

15 min read
10 take-aways
Audio & text

What's inside?

The U.S. must fix its dangerous, negative international debt structure, or face a recession with global repercussions.

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Editorial Rating

6

Qualities

  • Comprehensive
  • Analytical
  • Innovative

Recommendation

This expert analysis, written before the 2008 economic crisis, presents a thorough discussion of ways to avoid a possible world recession. Authors Carlos M. Peláez and Carlos A. Peláez cite a staggering number of expert analysts and researchers in this scholarly economic study. Although many of the arguments they cover are extremely technical, most business leaders could benefit from the views presented by the authors and important economic heavyweights, including Alan Greenspan and Ben Bernanke. The book covers the U.S. current account deficit (CAD) in detail, and then discusses other market areas and concerns. It reports on the U.S.-China trade imbalance, explaining that the U.S. has not responded to strong consumer-goods imports from the China-Asiatic basin with equally strong exports to even out the balance of trade. They note that this situation has worsened and could throw America into a serious recession. The book issues a clear warning, told through statistics and studies, that the international debt structure must be corrected as a “shared responsibility” of all nations. Although events have surpassed some of the Peláezs’ forecasting, getAbstract recommends this ponderous but valuable X-ray of the world’s financial imbalances to readers who want a serious analysis.

Summary

Are a Global Monetary Crisis and Recession at Hand?

Even for those with gray hair and doctorates, analyzing the possibility of an unpleasant world economic future marked by global recession and monetary crisis is difficult. The highest-ranking experts reach opposing conclusions. Richard T. McCormack, former U.S. undersecretary of state for economic affairs, warns, “Adjusting external imbalances is the current most important and potentially damaging issue in world finance.” In contrast, in 2003, Alan Greenspan, then chairman of the U.S. Federal Reserve Board, saw serious risk in the ratio between America’s Current Account Deficit (CAD) and its Gross National Product (GNP), but believed the nation’s account deficit might “be resolved without major disruption.”

To understand which side is “more” right about either foul weather or balmy conditions, look at the essentials of domestic and international finance. This demands examining America’s CAD. The current account is an economist’s concept of the interrelationship of four factors, expressed formulaically as: goods and services, plus income, minus unilateral transfers equals the current account. Based on this plain-vanilla...

About the Authors

Carlos M. Peláez, Ph.D., has published books, essays and articles worldwide. He was director of Banco Chase and the Rio de Janeiro Association of Banks, and vice president of Chase Manhattan Bank, USA. He is managing director of CMP Associates, USA. Carlos A. Peláez is the author of International Financial Architecture. He is an associate editor of the Journal of International Economic Law at the University of Pennsylvania Law School.

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