Comparative Advantage

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

My following comment on Gang8 on "comparative advantage" may be of interest.

 

Gunnar

 

 ...."analysis" of world trade and associated issues in terms of comparative advantage permits economists and policy-makers alike to ignore the single most important factor - the absolute advantage enjoyed by the U.S. in the production and export of U.S. Dollar Liabilities!

 

Within the U.S. economy itself, this absolute advantage encourages the [acquisition] of purchasing power through borrowing rather than earning it at the cost of the long-term relative decline in the share of the non-services sector in total U.S. output.

 

For the rest of the world, the steadily rising injection of U.S. purchasing power has fueled a Keynesian-type Aggregate Demand expansion, with attendant stimulus to all kinds of productive activity.

 

It is not rocket science to see that neither trend line is sustainable - that the world community will eventually be obliged to  re-invent a means of maintaining employment and output which does not depend for its "success" on gargantuan U.S. domestic credit creation.