1/5
Good Setser piece on rising global imbalances. Thanks in part to his work, central bankers and mainstream economists are slowly beginning to acknowledge that rising global imbalances can be a problem for the global economy.
Eventually they all will.
@Brad_Setser
cfr.org/blog/chinas-ma…
Good Setser piece on rising global imbalances. Thanks in part to his work, central bankers and mainstream economists are slowly beginning to acknowledge that rising global imbalances can be a problem for the global economy.
Eventually they all will.
@Brad_Setser
cfr.org/blog/chinas-ma…
2/5
Most mainstream economists know that every country's internal imbalances are always perfectly consistent with its external imbalances, just as its external imbalances are always perfectly consistent with the external imbalances of its trade partners.
Most mainstream economists know that every country's internal imbalances are always perfectly consistent with its external imbalances, just as its external imbalances are always perfectly consistent with the external imbalances of its trade partners.
3/5
But they are rarely able to understand the implications. When each country's external economy is linked through nearly-frictionless trade and capital flows, each country's domestic economy is also linked through the same mechanism. A country with deep internal imbalances...
But they are rarely able to understand the implications. When each country's external economy is linked through nearly-frictionless trade and capital flows, each country's domestic economy is also linked through the same mechanism. A country with deep internal imbalances...
4/5
that controls its trade and capital accounts creates the opposite external imbalances among its trade partners. These, in turn, must be accommodated by changes in their domestic economies. Distortions in one country automatically create distortions in its trade partners.
that controls its trade and capital accounts creates the opposite external imbalances among its trade partners. These, in turn, must be accommodated by changes in their domestic economies. Distortions in one country automatically create distortions in its trade partners.
5/5
Huge trade surpluses, in other words, don't just reflect deep domestic imbalances and distortions within the surplus economy. They also create the reverse imbalances and distortions among their more open trade partners.
In a hyper-globalized world, it couldn't be otherwise.
Huge trade surpluses, in other words, don't just reflect deep domestic imbalances and distortions within the surplus economy. They also create the reverse imbalances and distortions among their more open trade partners.
In a hyper-globalized world, it couldn't be otherwise.
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