I'm linking below an op-ed article by Stephen Roach in yesterday's NY Times.
Roach is known as a bear, but here he's making a policy suggestion that makes sense, IMO. It alludes to the fact that, this time around, the bulk of the country's spending is being weakened significantly by the real-estate bubble popping. So you have to adjust the structure of the country's domestic absorption -- expanding exports and government long-run investment (infrastructure). I'd add massive investment in "human capital" (education and health care), which I believe it's politically hard but doable. There's a catch though. For exports to grow the demand for U.S. goods in the rest of the world has to expand. And for a new wave of public capital build up the funds need to be available at reasonable rates -- and that also has to be money from outside. In the current conditions, there are hardened limits (and risks of inflation and currency meltdown) to the U.S. just printing money. IMO, the double play is doable, but only if something like the reform of the international monetary system suggested by Stiglitz is adopted. A new president would be in a position to lead that effort. Basically, the ROW needs some form of global insurance against future forex volatility. The ultimate form of insurance would be a single global currency. But that's not politically feasible in the short run. So, the next best is a Keynesian reform a la Stiglitz, I believe. That's the only way the ROW can pull U.S. imports and push funds into the U.S. Otherwise, the goals will conflict with each other. http://www.nytimes.com/2008/03/05/opinion/05roach.html _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
