The Global Financial Crisis: Genesis, Policy Response

Book Preface

My earlier book on globalization was published in December 2007. It focused on the genesis and impact of major global economic policy change in the postwar period which has brought a dramatic shift in global trade, investments, and financing, thereby causing the most pronounced reduction in the global economic divide. It was time to move on to my next assignment which I was ruminating on and was my natural interest and obsession for years. The US Dollar at Crossroads was the theme I have been working on since the demise of the Bretton Woods. Although the floating exchange rates and globalization gave fresh lease for the US dollar, the institution of American capitalism was under stress. The New Deal formed the cornerstone of American capitalism since the Great Depression days of the 1930s. Despite some minor hiccups, the system continued to serve as the engine of economic prosperity. Communism collapsed as it took the shape of hierarchical, bureaucratic, and totalitarian machine devoid of market signals and individualism that engender innovation and enterprise. American capitalism succeeded as the invincible political economic doctrine but still remained under pressure to achieve its goal of sustained growth, full employment, and price stability. Yet nobody expected the major crisis as it did in 2008.

In September 2008, I had meetings in the IMF and with Paul Volcker giving presentation of my book. Coincidentally, in the same month later, the economy witnessed an unexpected bolt from the blue—the USA experienced its worst financial and economic crisis since the Great Depression of the 1930s. My op-ed on the subject titled “Keynes: Savior of Capitalism” was published in Washington Times on October 1, 2008. My attention for research and analysis naturally shifted from the future of dollar to much larger and more fundamental issues of the structure and dynamics of the US economy, American capitalism, backlash of globalization, and the need for the further reform of the global economy and monetary system. The global fi nancial crisis, the function and dysfunction of dollar, and its future role became the focal point of the book.