Re: Article in THE ECONOMIST by Davidson

["William B. Ryan" <william_b_ryan@xxxxxxxxxx>]

"More and more policy makers in the exporting economies are beginning
to
understand the futility of expert coupled with capital account defict.
It distorts domestic development.  Also, "better employment condition
at
home" is not factually operative in any exporting economy, as the
AFL-CIO will tell you."
----------

As with much of your commentary, you distort (when not plagiarizing)
what others have said.

Hummel was using the term "better employment conditions" in respect of
full employment.  He perhaps could have termed it better.  The AFL-CIO
maintains that exporting countries are able to sell more cheaply in the
US because they exploit their labor and environment.


--
William B. Ryan
william_b_ryan@xxxxxxxxxx - email
voicemail/fax - 1-866-678-3967 - toll free



---- "Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx> wrote:
>
>
> William F Hummel wrote:
>
> >
> > The US didn't engineer the dollar supremacy.  It was the only
> > currency in which international exchange could readily take place
> > in the period immediately after World War II.  The Bretton Woods
> > monetary system that formalized the dollar as the international
> > currency was freely joined by other nations because it was in
> > their own interest.  It worked well for almost every nation until
> > its demise in 1971.  During that period the US in effect lent
> > long and borrowed far less short from the rest of the world,
> > thereby providing the dollar assets needed by other countries.
> > Nobody objected to the large current account surplus that the US
> > ran at that time.
>
> This is either a distortion or an ignorance of history.  Bretton Woods
> died in 1971 a slow death of contradiction between US fiscal
> irresponsibility and the gold standard.  The fact was that until the
> collapse of the USSR, world trade was primarily Western trade subsidized
> by the US.  The two separate segmeents of the global economy operated
> through aid by each of the superpowers.  Trade was in all practical
> terms non-existent.  The was true for the Japanese and German economic
> "miracle."  The Marshall Plan was a political program, not a trade
> regime, though trade served a function.  Trade friction developed
> between the US's new allies and former enemies as the US grew confident
> about winning the Cold War.  That trade friction was resolved with
> the
> trade off between currency account deficit and capital account surplus
> in favor of the US through dollar reserve status.  After the Cold War,
> when globalized trade took off, this formula was expanded to cover
> the
> entire world.
>
> Prior to 1971, "Nobody objected to the large current account surplus
> that the US ran at that time" because they all felt they earned their
> trade deficit by being US allies and got paid for serving US
> geopolitical and ideological interests.  It was payment for being
> anti-communist.
>
> >
> >
> > The dollar standard became so useful to other countries by 1971
> > that it remains to this day, That's true in spite of the fact
> > that since about 1980 the US has been providing dollars on
> > balance through current accounts deficits rather than capital
> > outflows.
>
> I suggest that you study the political economy behind the Plaza Accord.
>
> >  I don't advocate the US continuing large current
> > account deficits, but it's a two way street.  Other countries
> > fight hard to maintain their trade surpluses with the US since it
> > means better employment conditions at home.  The opposite side of
> > the coin is the steady hollowing out of the manufacturing sector
> > in the US.
>
> More and more policy makers in the exporting economies are beginning
> to
> understand the futility of expert coupled with  capital account defict.
> It distorts domestic development.  Also, "better employment condition
> at
> home" is not factually operative in any exporting economy, as the
> AFL-CIO will tell you.
>
> >  Major trading partners also erect barriers to US
> > capital outflows that could help reduce its current account
> > deficit.
>
> I don't understand this statement.
>
> >
> >
> > It's understandable that many outside the US look at its current
> > account balance and equate that to lavish over-consumption.  It's
> > true that the US has a unique advantage in terms of borrowing in
> > its own currency, making it much easier to avoid financial
> > crises.  However I suggest that those who envy the US position
> > take a closer look at their own policies.  They should also
> > consider how much less efficient world trade would be if there
> > were no international monetary standard.  The inequities that
> > folks outside the US see may then appear more superficial than
> > real.
> >
>
> No one is arguing for the absence of an international monetary standard,
> only a more equitable one. The last sentence above is the equivalent
> of
> "tyrany is tolerable because it delivers order".
>
> Henry C.K. Liu
>
>
>