SINGAPORE — The world faces a depreciation of the dollar, a phenomenon that will result in the transfer of purchasing power from the United States to other parts of the world, specifically to Asia and to a lesser extent, Europe. An unprecedented economic decline for the U.S., never evinced in its history, is on the cards.
This is certain to happen. The uncertainty is when and whether it will be an orderly and controlled adjustment under the aegis of the authorities or imposed by a market that finds policy makers not up to the task of restructuring and re-balancing the world economy.
The basic problem on the agenda is not a reform of the global monetary system or more regulation in the financial sector. Although something has to be done in these areas, the real problem is much more daunting.