owing furriners

[Greg Nowell]

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

Fax 518-442-5298