Re: Keynes' Legacy [Was: Re: Fw: [gang8] Fw: RATIONAL EXPECTATIONS

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> This seems to imply that "excess domestic credit creation" by the
> US is the CAUSE of the US trade deficit. No trading partner is
> forced to run trade surpluses with the US.

Comment:

There are two ways for the US trade deficit to disappear.

1.  The US limits its domestic credit creation; or

2.  The US dollar loses its world currency status.

The first option would 'stabilize' the US economy IMF-style.

The second would 'stabilize' the World economy IMF-style.

> On the contrary, each
> actively promotes its own trade surplus, and is happy with its
> growing supply of dollar assets.

Hobson's Choice.

> It just doesn't want the US to
> continue running a large trade deficit because of the effect on
> the value of its own dollar assets.

As in NOT "happy with its growing supply of dollar assets"?

> But when it comes to helping
> solve that problem, there are no volunteers.

What "problem"?

Gunnar


----- Original Message -----
From: "William F Hummel" <wfhummel@xxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Thursday, May 15, 2003 4:10 PM
Subject: Re: Keynes' Legacy [Was: Re: Fw: [gang8] Fw: RATIONAL EXPECTATIONS


> Gunnar Tomasson wrote;
> >
> >I don't equate Keynes with either his "legacy" or "followers".
> >
> >In the post-Bretton Woods era, his "legacy" has been transformed by
> >self-proclaimed "followers" into the notion that the U.S. performs a
useful
> >function as World Engine of Growth through the spill-over of Excess
Domestic
> >Credit Creation into a Deficit on External Goods and Services account now
> >running at about $500 billion on an annual basis.
> >
> This seems to imply that "excess domestic credit creation" by the
> US is the CAUSE of the US trade deficit.  No trading partner is
> forced to run trade surpluses with the US.  On the contrary, each
> actively promotes its own trade surplus, and is happy with its
> growing supply of dollar assets.  It just doesn't want the US to
> continue running a large trade deficit because of the effect on
> the value of its own dollar assets.  But when it comes to helping
> solve that problem, there are no volunteers.  It takes two to
> dance.
>
> William F Hummel
>
>
>