In another of his typically opaque posts at RealClearBusiness Jeffrey Snider takes 1,000 words to say something that could be said in a few: as long as the unimaginably large China keeps exporting inexpensive goods and deflation European and American central banks will never get inflation back to what they consider normal.
He does make some interesting points, however, to the effect that economics has transmogrified from a descriptive science to an ideology and that globalization and free trade are not identical.
The international trade system is broken and had been since President Clinton inserted the TRIPS provisions (requiring developing countries to observe American patent laws) into the WTO. This reversed capital and trade flows, forcing developing countries to pursue domestic deflation policies to run export surpluses.
I think the article is about dollars, “dollars”, eurodollars, and petro-dollars and the different effects of each. (Dollars are a stand-in for money.) Each of these are prefixed with the same “$”, but they do not function the same.
Dollars are currency, and they are assumed to function as hard money. “Dollars” are what I call credit-backed dollars, and these function similar to financial instruments. I believe that euro-dollars are what I call trade deficit dollars, and these only exist on the balance sheets outside any nation’s monetary system. He rarely mentions petro-dollars, and I think his oil reference is about these.
His thesis is that central bankers are worthless, and anything that they do must fail. This is not the way he states it. The rest of the article is to support this argument.
He has traced euro-dollars back to the mid or early 1950s, but I think that is the first mention of their existence. I suspect that they are related to the Marshall Plan. In any case, they are artifacts of accounting, and there is nothing backing them.
Because euro-dollars are artifacts of accounting, they only exist in the financial system, and as such, they can only be used within that system. Euro-dollars are used to create credit some of which is loaned creating debt.
Petro-dollars are also outside any nation’s monetary system, but they are backed by a physical commodity. Instead of using petro-dollars, the accounting could be done with barrels of oil, and in fact, these barrels of oil have actual effects on monetary systems.
The headline seems strange. He might not have written it, or it might be click-bait.