A collection of reduced-form equations

I was attracted by the title of this article: A 21st-Century Bretton Woods, because our venerable Prof. Dooley is one of the few economists advocating the Bretton Woods II theory. I wanted to see if the media has caught up with this on-the-edge economic thinking.

It turned out that the author is nothing more than a wannabe prophet who is drawing incorrect analogy between history and current events. One of the examples in the article is comparing the succession of world dominance from the British Empire to the U.S. with the rising challenge from China to the U.S. these days. I really don't know how he gets such a conclusion. China in many ways is going to be a major power in the world, but to challenge the U.S. dominance now? Not a chance. I see the U.S. as the model of the future world. Every time I sit in a classroom, watch TV shows, shop in a mall, or simply browse the bookshelves at Borders, I can't stop saying to myself that this is such a vibrant, diversified and thus great country. It is good that China is catching up, but the U.S. is never in a static mode. The gap will shrink but the U.S. won't give away the throne in the next few centuries.

Just like most of the prophets, the author needs to say something alarming, something eccentric to get attention. The new order of global finance is determined right here in the U.S. It is good that the American President is inclusive in the sense that he consults with other world leaders, but I don't see why we need a nod from China to restore the order of international finance. Some cite the fact that the U.S. needs China and other countries to buy treasuries to finance the bailout plan. But do you really think that China, other Asian countries, and OPEC members buy dollar-denominated debts out of altruism? Judging by the current dollar spike, I would say those countries are voting with their money. They are more desperate than the media think. The U.S. is still the safest place to hide your piggy bank. I believe this is the essence of Prof. Dooley's Bretton Woods II theory- hooking up with the U.S. to grow the countries.

To paraphrase Prof. Dooley, the author's analysis is only a collection of reduced-form equations. In other words, meaningless.

(Picture: Time & Life Pictures/Getty Images through The Wall Street Journal)