Article 8 Review

This article by argues about how the "Golden Age of the Central Banker" has turned into the "Silver Age of the Central Banker" due to the change in structure. Investors used to be able to affect monetary policy, but the power has shifted from the investors to the domestic politics of nations. The article argues that this is all because of massive global debt.The author finally gets to his main point when he brings up game theory in big-picture terms. Each economy is going to make a decision based off of its best outcomes. This means that even though it may not be good for the rest of the world, China may “float the yuan” because its good for them in a political perspective. Game theory notes that if each member of a decision or cooperation defects, each is bound to benefit in some way. Only if one defects and the other cooperates does someone (the one who cooperated) not benefit. The highest benefit comes from both people cooperating, but neither member can depend on the other to cooperate, so this is an unlikely outcome. A concept in the article that relates the most to Chapter 32 is that when domestic currency depreciates, its nation’s goods and services will be much cheaper relative to those of foreign nations. This is great for increasing net exports, but it is bad for the big companies that rely on importing goods from other countries whose currencies are appreciating relative to their own because the goods and services that they were importing are now more expensive due to appreciation of that foreign currency. It makes sense that nations ultimately don’t care about this negative side because it does not think like a private business. It thinks as a nation, and its domestic political agenda tells it to keep GDP as high as possible nationwide, meaning increasing the NX portion of the GDP components, C + I + G + NX.