On Nov 22, 2012, at 12:33 PM, Jim Devine wrote:
One thing is that if the US GDP grows more quickly, that pulls up the rest of the world. In some ways, the late 1990s was an example of it. Rubin's program of maintaining a high dollar shifted demand to help other countries (while preventing the inflation that would have caused Greenspan to step on the monetary brakes), but the growth of US GDP also helped that effect. With or without a high dollar, US growth may be what world capitalism needs...
The US gdp growth under Clinton/Rubin "pulled up" global demand via only one route: the US trade deficit. But since Rubinomics involved a govt. budget surplus, the increased debt required to finance the trade deficit had to come from the private sector--and it did so through rapidly expanding private debt. Which led to credit contraction in the 2000 crash and Clinton recession, which Bush countered by an explosion of the public-sector deficit and rapid rebuilding of private debt. In the Bush depression the US is pushing the rest of the world down by cutting its trade deficit while private indebtedness remains stubbornly too high to permit itself much at all in the way of expansion. This is a situation in which an expansion of national income (and therefore of the trade deficit) sufficient to pull up the rest of the world is impossible (lacking a Greenspan to explode private debt) without much greater government deficits. Which is exactly the opposite of the Washington/Wall Street consensus and totally counter to the trend in state and local government budgeting.
Shane Mage "All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods." Herakleitos of Ephesos, fr, 90
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