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December 23, 2008
JoongAng Daily
by Park Jong-kyu
"We Americans are Romans of the modern day." These were the gallant words of a famous U.S. historian during a lecture at Princeton University a few years ago. He said there were only two empires - in the truest sense of the word - in the history of the human race, and the first was the Roman Empire and the second was the American Empire, or the United States.
Research Interests
JoongAng Daily
by Park Jong-kyu
"We Americans are Romans of the modern day." These were the gallant words of a famous U.S. historian during a lecture at Princeton University a few years ago. He said there were only two empires - in the truest sense of the word - in the history of the human race, and the first was the Roman Empire and the second was the American Empire, or the United States.
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Empires conquer other countries and collect tributes from them to cover the cost for the maintenance and management of the empire. This was the way not only in the Roman Empire, but also in all empires that rose and fell in Europe and Asia.
However, this is not the way of the United States. It does not subjugate other countries or collect tributes. Instead, it sells bonds. The households and government of the United States overspend, and as the current account deficit accumulated, it secured necessary funds by selling bonds to other countries.
[..]
The United States also adopted the method of lowering the value of the dollar to reduce actual redemption burdens whenever foreign liabilities reached a limit.
Examples of this were the Plaza Agreement in the mid-1980s, and the devaluation of the dollar in 2002 and 2005. It does not collect tributes by force; rather it collects a sort of inflation tax called dollar devaluation.
The zero interest and unlimited funds supply policy adopted by the Board of Governors of the Federal Reserve Bank a few days ago is part of this pattern.
[..]
There is also a big chance that a new bubble will be created while an enormous volume of liquidity wanders around in the international financial market. Zero interest is not a panacea, but it could be a sign to beware.
If the United States is the one that has caused the problem, it must hold the key to the solution, too. If the U.S. repeats the existing pattern of selling bonds and lowering the value of the dollar, the future will be dark.
If the Obama administration, which promises "change," recovers the spirit that considers frugality and diligence to be virtues, it will be a good sign. cont.
*The writer is a senior researcher at the Korea Institute of Finance. Translation by the JoongAng Daily staff.
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With daily circulation of 2200000, Joongang Ilbo is one of the biggest newspapers in the world.
Joongang Ilbo is a daily newspaper in Seoul, Korea (South) covering general news. JoongAng Ilbo began publication in 1965. It is a conservative newspaper and one of the largest in Korea. The newspaper also publishes an English edition, JoongAng Daily, in cooperation with the International Herald Tribune.
(source: Mondo Times)
Joongang Ilbo is a daily newspaper in Seoul, Korea (South) covering general news. JoongAng Ilbo began publication in 1965. It is a conservative newspaper and one of the largest in Korea. The newspaper also publishes an English edition, JoongAng Daily, in cooperation with the International Herald Tribune.
(source: Mondo Times)
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the author?
Jongkyu Park, PhD
Visiting Scholar (former)
Shorenstein APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055
(650) 723-2408 (voice)
Jongkyu Park, PhD
Visiting Scholar (former)
Shorenstein APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055
(650) 723-2408 (voice)
Research Interests
Measuring positive and negative impacts of economic integration of two Koreas, searching for remedies to overcome its negative impacts and trying to identify areas to be prepared.
For the past 14 years, Jongkyu Park has worked on various macroeconomic policy issues of Korean economy including economic forecasts, monetary policy, inflation, budget deficit, exchange rate, savings rate, population aging, realestate bubble, Japan's economic slowdown and revival, etc. He received B.A. in Economics from Seoul National University in Korea, M.S. in Statistics from University of North Carolina at Chapel Hill and Ph. D. in Economics from Princeton University.
For the past 14 years, Jongkyu Park has worked on various macroeconomic policy issues of Korean economy including economic forecasts, monetary policy, inflation, budget deficit, exchange rate, savings rate, population aging, realestate bubble, Japan's economic slowdown and revival, etc. He received B.A. in Economics from Seoul National University in Korea, M.S. in Statistics from University of North Carolina at Chapel Hill and Ph. D. in Economics from Princeton University.
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