For How Long? At What Cost?

["John Gelles" <jjgelles@xxxxxxxx>]

            "Only as long as the US persistently runs larger
             and larger trade deficits with benign neglect can
             the rest of the world improve !!"
                                                       -- Paul Davidson

            "This is an insight that Greenspan/Rubin/Summers
             have never grasped.  Globalization requires a US
             trade deficit.  The US has no choice but to be the
             market of last resort.  This is the function of the
             leading component of the global economy, just as
             it is the role of the central bank to be lender of last
             resort.
            "The US dual policy of a strong dollar being in its
             national interest and its unrealistic quest for
             declining trade deficit in an expanding global
             economy is self-contradictory."
                                                        -- Henry Liu

        With "benign neglect" indeed!.

        We Keynesians know, as Paul has argued, that the
        author of hard money, the USA, can keep creating
        more money until it softens up.  We can keep world
        trade moving until no one wants the dollar.
                    Or until ancilliary effects, like high interest
        costs (associated with hardness of the dollar and its
        power to stimulate world trade) begins to hurt.
                    Or unemployment in the USA demands
        protection of labor.

        Meanwhile, assuming Greenspan and Summers are
        as smart as Davidson and Liu, (a proposition that is
        self-evident), effort to improve the US balance of
        payments, via export of tangible and intellectual
        property, makes a lot of sense.

        Surely the day must come when the economic
        infrastructure of the so called "global economy"
        will include a great many nations able to fully
        protect their consumers from predatory export
        drives intended to make them dependent on
        foreigners out to do no good -- economic
        colonialists, favorably situated, but not so much
        so as once such exploiters were.

        Remember this:  Anytime the USA wanted to
        close its consumer markets to all foreign exports
        it could -- with no ill effect on others.   All it
        would have to do, after closure, is to offer
        foreign nations credit to buy their needs -- of
        both consumer and capital goods.

        The undeveloped nations, who thereafter
        borrowed their needs, (as if by the old lend-lease),
        would fight the battle on their soil to develop
        local industry -- without throwiing Americans out
        of work.

        What would remain to be done is to arrive at a
        low enough rate of interest (on such borrowed
        development money) for the recipient nations to
        be able to handle their debt without real cost
        to their progress.
                    That would be easy enough, especially
        if they were open to tourism.

        Meanwhile, Americans are working in temporary
        and part time jobs as globaloney is spouted by
        experts.  Most of whom ask others to pay its
        cost.

        Greenspan, Summers, Davidson and Liu, may be
        equally smart.  Are they equally good for American
        labor?  For world labor?
                Of course not. We know our PK'ers are better.
        Their quoted ideas above are but a tiny segment of
        their intended program.  In fact, to labor, they are
        even nicer than I am -- if only you read all they've
        written.

        In your dreams.

        John Gelles
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             url    http://1944.org