Thursday 10 October 2013

The problem is persistent imbalance of trade

Isn't it simple?

There is persistent trade imbalance, by design, today.

If the trade surplus countries choose not to perpetuate this imbalance by merely accumulating ever more credits that they will not redeem for useful goods and services, because after all they are persistently running trade surpluses, then they can choose to instead simply redeem the credits for something useless but real today instead. This act would immediately address the balance of payments issue, directly through the current account. It would also give the trade deficit countries pause for thought, if they have to go back to parting with something real.

So why aren't any of the trade surplus countries doing just this today? That is the real question, and I suspect you would find the answer has little to do with the stock of money.

What? Me no more free stuff?
What? Me fewer jobs?


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