From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Fri Mar 17 2006 - 15:51:34 EST
On Fri, 17 Mar 2006 13:32:26 -0600 Alejandro Valle Baeza <valle@SERVIDOR.UNAM.MX> wrote: > > Dear Rakesh, do you agree with WSJ that US current account deficit is > not a big problem for US economy? Such deficit is about 6% of GDP. Do > you think it is unsustainable everywhere but is not a problem in US? > > best wishes > Alejandro The CAD may be a bigger problem for US's creditors than it is for the US! As Susan Strange long ago pointed out in Mad Money (1998): the US can use "its bargaining power as military protector, or as interventionist meddler, or as major trading partner to get its own way and to make others undergo the painful adjustments." At any rate, differential returns does seem to be one important factor in why the unsustainable has been sustainable longer than most Marxists would have thought. For years I have been suggesting that we probe why the apparently unsustainable has proven sustainable in what must now be considered not the short but medium term. Yours, Rakesh
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