The international monetary system has changed, but it still benefits the United States

From the 1990s to 2012, the international monetary system was based on the financing of the US external deficit by China, but also Japan and oil-exporting countries. This arrangement (known as “Bretton Woods II”) was good for all countries: the United States was able to finance its consumption and investment with external debt at low interest rates; the other countries - especially China - had access to a risk-free asset (US Treasuries) and stimulated their production by selling goods to the United States. This regime disappeared in 2013 . It has been replaced by another , where the United States continue s to be financed, no longer by the same countries but by Europe and emerging countries other than China and oil exporters. There is no longer a mutually beneficial s etup between the United States and China, but the United States has retained its capacity to accumulate a huge external debt at very low cost. A real ly drastic change in the international monetary system would be if it no longer benefited the United States , in the absence of a country that bought US Treasuries. This would require the euro zone to use its savings surplus to invest in the euro zone and no longer to lend to the rest of the world. We know that the financing of the EUR 750 billion recovery plan is a first step in this direction. An international monetary system that no longer resulted in structural purchases of US Treasuries would lead to an acute crisis in the United States .