(email exchange)
Seems none of them have any clue that they are better off doing it unilaterally and hoping the other don’t follow.
That would maximize their real terms of trade/standard of living.
This is our big chance for the us to act first, aggressively, and alone to absorb the entire world’s excess capacity rather than just our own.
We can have a payroll tax holiday and start up our infrastructure projects, etc. while encouraging others to hang tough on fiscal policy and sit back and watch their exports to the US skyrocket as they both build FX reserves (yes, encourage ‘currency manipulation’) and work to balance their budgets.
With economics, unlike most religion, it’s better to receive (real goods and services) than to give, and if others don’t know that it’s not our problem- it’s our opportunity!
>
> In purely economic terms you are correct, insofar as it is better to
> receive a bushel of wheat than to export mounds of coffee. The first is
> clearly a benefit and the 2nd a cost. But when you’re exporting
> something further up the value chain, there do seem to be some good
> multiplier effects which have a positive impact on domestic demand.
>
Any nation can set aggregate demand at any level it wants independently of external forces.
>
> I’d also like to see the Chinese embark on a serious infrastructure
> build for their interior, and encourage their population to become a
> nation of rampant consumers.
>
I’d like to see them continue to send all their stuff to us and accumulate $US financial assets.
But seems they may be too smart for that, as per their new stimulus program.
>
> I have no problem with everybody doing fiscal aggressively.
>
As above.
>
> I also want a weaker dollar so that the cost of servicing these dollar
> denominated debts declines in real terms.
>
I’d rather see them servicing their USD debt by net exporting to us to get the needed USD.
But seems our leaders are not going to happen either.
They are killing the biggest goose of all time.
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