Tuesday, April 17, 2012

stiglitz: is mercantilism doomed to fail?

The basic idea is: A few powerhouses like China, Germany, and Japan, plus some commodity based economies, have thrived in a system where they do all the exporting, and a few countries like the US run massive trade deficits.

But that system is coming to an end, as countries realize that their trade deficits are unsustainable, and seek to become trade surplus countries at the same time. Of course, not everyone can run surpluses, so this becomes a game of hot potato, with everyone pushing the deficit to someone else, via currency devaluation and other aggressive trade moves.

In this presentation, Stiglitz explains why the system is heading towards collapse.

Stiglitz hints a globalist solution, with a non-dollar reserve currency, and more coordination of monetary policy to avoid currency wars and competitive devaluations.

2 comments:

umbrarchist said...

Isn't this inevitable when everyone is concentrating on CASH FLOW instead of NET WORTH?

And then our nitwit economists concentrate on NATIONS instead of the NET WORTH of the majority of individuals.  Consider the population density of the United States.  Why can't 75% of Americans have their homes paid for?  What would that do to the demand for wages?  If Americans could live well on lower wages couldn't that reduce production costs?

Everybody understanding accounting and refusing to buy junk designed to depreciate would change the workings of the economy. But then economists would have to learn to do algebra.

Oh yeah, they would have to admit they were doing it wrong for the last 60 years.  Imagine White men with PhDs admitting that.  LOL
 

haljett said...

Stiglitz isn't the only predicting that move. Julian Phillips has been writing about a return to a currency backed by gold in some fashion as the dollar slowly loses its reserve status. And the recent use by the US of the SWIFT system against Iran is looking like it's going to cause some back fire from the BRIICS. One thing I'm certain of is that we are heading into some very interesting times.