Wednesday, February 11, 2009

It's better to go out and "stimulate" the economy than to read this...

at least you have some control over that.

Noah Smith has written a thought-provoking post for Observing Japan in which he explains how the system that allowed certain countries accumulating huge trade surpluses and exporting capital while requiring others to accumulate trade deficits and to import capital is under severe strain (to say the least) and discusses possible consequences for Japan. It is not easy reading for anyone who lives here.*

Frankly, not only is Japan not considering---at least publicly---how it will operate in what seems like a new global economy, there isn't much evidence that the US (or any other government) is either.

*The Far Eastern Economic Review article Mr. Smith linked to is interesting reading too as it looks at the problem as it relates to China and compares the global payment imbalances of today with those of the years immediately preceding the Great Depression.

A quote from that FEER article:
"This cannot work for long. The proper place for new demand to originate is, as in the 1930s, in trade-surplus countries. They should be engaged in expanding demand, not expanding supply."
Are we not in deep natto?

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