Re: [OPE-L] Trade Deficit Disorder

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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