Re: NYTimes.com Article: A Fiscal Train Wreck

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

pdavidso wrote:
> Again today is a much mor complex economy and with free international capital
> mobility the problem for the Fed can be somewhat more difficult than in the
> 1940s -- but it is not beyond the abaility of the US government to handle such
> problems.

With less than 4% of the world's population, and 30% of world GDP, and
with dollar hegemony, the US is practically unaffected, or unaffectable
by cross border capital flows, as long as the dollar remains the world
dominant currency for balance of payment acounts.

The problem with the US economy is that it cannot increase consumption
even in a world of overcapacity partly because of ideology but partly
because no country in a world economy can increase consumption
unilaterally.  That is the conceptual gap of neo-liberalism. US planners
need to understand that keeping the rest of the world poor also keeps
the US poor, even though the US has a 5:1 ratio on GDP:population. If
the US were to allow this ratio to drop to 3:1, the US  will be richer
in absolute terms.

Henry C.K. Liu