[ExI] Fwd: The Theory That's Killing America's Economy -- and Why It's Wrong

[Mirco Romanato]

Il 01/05/2011 16:21, Keith Henson ha scritto:
> The main point made here:
> 
> "The problem here is that the theory of comparative advantage pays no
> attention to the long term. So it can quite easily recommend a trade
> policy that gives us the highest possible living standard in the short
> run -- but by way of selling off our country out from under us.
> 
> "This is what happens when a nation runs a trade deficit, which
> necessarily means that it's either sinking into debt to foreigners or
> selling off its existing assets to them.
> 
> "The theory of comparative advantage is blind to this problem because
> it treats people's time horizons as a given. So if a nation wants a
> short-term consumption binge followed by long-term decline, the theory
> says "OK, no problem. You wanted it, you got it, what's not to like?"
> 
> Keith
> 
> http://www.huffingtonpost.com/ian-fletcher/the-theory-thats-killing-_b_846452.html
> ==========================================================

The theory is right in its aprioristic setting.
The rest is only a problem of time horizons.
What is right with a time horizon of one year could be wrong with a time
horizon of ten or one hundred.

A trade deficit signal the nation, in its aggregate, value the money
less than the stuff and services it can buy. The reverse is also true.

Lower is the value of the money, greater the trade deficit.

This is not strange if the money give no interest if saved and the
interest is low when borrowed. Nor if the money is printed and showered
around like there is tomorrow.

Yes, I'm looking you, Fed!

Mirco