Premise:
Suppose that emerging economies announced tomorrow that there will be no more loans to the United States.
Nope, no money illusion here:
Could this lead to inflation? It is unlikely given the massive amount of excess capacity and huge numbers of unemployed workers in the U.S. economy.
Borderline:
A lower dollar is essential for getting the trade deficit down. Everything else is chicken feed.
Would the lower dollar lead the rebalance? Well, it will be very close behind.
This means that if deficit whiners understood economics, they would all be demanding a lower-valued dollar.
This is not true.
If you want more exports and less imports, you have to stop the oil tankers coming from Arabia, and sell energy conserving machines.
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