As I said in my previous post, explaning the debt crisis Bernard Snoy put more emphasis on the way the international monetary system had evolved. In his speech of June 7th, 1986, he said: "When the Bretton Woods monetary system collapsed in 1971, this caused great economic and monetary uncertainty, and the large U.S. budget deficit led to an increase in lending and borrowing in U.S. dollars outside the U.S., notably on the uncontrolled Euro-markets. Together with the sudden increase in oil prices and the oil-producers' subsequent preference to place their revenues in short-term deposits in commercial banks, the conditions leading to the massive increase in international debts were set."
In these two sentences Bernard said a lot of things other "analysts" of the debt crisis did not say: (1) its relationship with the international monetary system; (2) global economic and monetary uncertainty; (3) large US budget deficit; (4) US debt leading to an increase in lending and borrowing in US dollars; (5) uncontrolled international capital markets; (6) oil producers' preference to place their revenues in short-term deposits in commercial banks.
These six factors are worth dwelling upon and applying to the current crisis in international capital markets. I would like to do that in a next post -- if you haven't done so already in your comments (will there be comments? I'd like to invite Barbara, Wing, John, Jan, Peter B., Charles, Stephany, José Antonio, Rob, Mark, Ricardo, William (Bill), Louis, Zdeněk, Yung Chul, Roy, Bernardo, Eugene, Brian, Jane D', Bernard (Snoy), Dani, Barry, György, Esteban, Andrew (Sheng), Matthew, Yılmaz, Ernest, Benno, William, Amar, Amar, Henk, Nout, Age, Stijn, Geske, Geoffrey, Mohamed, Onno de, Rogério, Heiner, Eisuke, Geng, Yunjong, Fan, Robert, Marek, Gerald K. (Gerry), Jan, Li-Gang, Johannes, Liliana, Osvaldo, Jeffrey...)
I still owe you the question I raised in the June 7th 1986 debate organised by Dutch christian-democrats (attended by Balkenende) and the reply by Onno Ruding, both according to the report. Here comes my question: I "asked whether the allies of the U.S. would be willing to use their influence in order to plead for a reduction in military expenditures, so as to reduce the U.S. budget deficit and thereby lead to a lower interest rate."
And Ruding answered: "At the heart of today's discussion is whether the U.S. should decrease its budget deficit, not how it is to do so, however interesting that might be for the U.S. itself or for those in favor of reducing military expenditures."