owing furriners

Greg Nowell GN842 at CNSVAX.Albany.Edu
Tue Dec 1 16:06:48 PST 1998

I find the discussion of this issue mis-specified. Gold, for example, is the only common central bank asset that is not someone else's liability. When a big pile of gold moved to the US in WWI, we became the world's bankers. We had many ties to the UK, but the solvency of our banking system did not depend on the solvency of the UK, because gold is an asset is an asset, not a liability.

By contrast, all that stuff we've moved overseas in the post-gold period, while counted as assets in foreign banking systems, is in fact our liability. Paradoxically that makes them MUCH more dependent on us, under the old canard, that if I owe you $1,000, that's my problem, if I owe you $100 billion, that's your problem. Japan's situation as a creditor country is fundamentally different from the US position after WWI, because their assets are our liabilities. They can only "redeem" their assets against our goods (or other paper assets), which indicates they may not choose to redeem. This is a point missed by Arrighi in his Long 20th Century, and it goes a long way to explaining Japan's relative weakness in spite of its industrial prowess. -gn

-- Gregory P. Nowell Associate Professor Department of Political Science, Milne 100 State University of New York 135 Western Ave. Albany, New York 12222

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