America Is Ailing—and Leading the WorldRoundup
tags: public health, economics, Great Recession, Donald Trump, 2008 financial crisis
Adam Tooze is a history professor and director of the European Institute at Columbia University. His latest book is Crashed: How a Decade of Financial Crises Changed the World, and he is currently working on a history of the climate crisis. Twitter: @adam_tooze
But are Bildt and others correct when they extrapolate this profound dysfunction of domestic order to mean the end of American influence? To see why that suggestion is simplistic and premature, all you have to do is to travel not to the U.N. in midtown Manhattan but down the island to the building at 33 Liberty St., the Federal Reserve Bank of New York. It is from that building that America’s national Federal Reserve system, with its headquarters in Washington, D.C., operates its international business.
Dollar-based finance spans the entire world. And over the last few weeks it has been busy, astonishingly so. The panic in the markets has dominated the headlines the way it did in 2008 not just because people are dying, but also because we have actually avoided a Lehman Brothers moment of major banks cratering. We have avoided a crisis in part because the banks are more solid. But the pressures on the market-based asset management system have been gigantic. Everyone wants dollars. The pundits have been hammering away demanding action. And the Fed has delivered—remarkably. Its interventions not only at home but also in the international arena have been quicker and larger in scale than 2008. This week, the Fed has added a new innovation: a repurchase agreement facility for foreign central banks. This is crucial, because it allows them to access dollar liquidity without engaging in destabilizing sales of their portfolios of Treasurys. This is a huge expansion of the Fed’s reach. It will still not be enough. The International Monetary Fund will be needed. And, in a little-noticed move on March 27, the United States took the lead in voting for the renewal of the IMF’s finances.
This is not what one would have expected in an age of “Make America Great Again.” It was reasonable to expect Republicans in Congress, or the White House itself, to constrain the Fed. But that’s not what has happened.
A cynic would say this is not surprising. The Republicans aren’t really ideologues. Even their “America first” rhetoric is just that: rhetoric. Deep down, they are just tacticians. They obstruct a Democratic president and give their own president what he needs. Look at their votes on whether to provide an economic stimulus. In January 2009, every single Republican in Congress voted against President Barack Obama’s $825 billion spending package. Now they have given overwhelming support to the $2.2 trillion stimulus signed last week by Trump, and more may be in the works.
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