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The paper begins with a discussion of the ways in which a fiat currency and privatized payments system under the guardianship of a few wealthy developed countries and their private multinational financial institutions have contributed to the problem. This is followed by an examination of U.S. debt and global imbalances that focuses on the U.S. international investment position, the link between foreign exchange reserves held in the U.S. and liquidity creation and the link between net capital flows and credit expansion. Part II analyses the risks in failing to address the U.S. foreign debt problem and Part III offers proposals needed to address the monetary aspects of global imbalances.


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