>You think the U.S. would go nuclear like this if Japanese repatriated
>some capital? Or if they stopped buying new Treasuries? It'd be
>political dynamite to shut down the flow of TVs and Discmans;
There seems to me good reason to think Japan will not reptariate that much capital in the near future;plus, I don't think Big Boy Wonder Larry Sumners is joking about the US commitment to maintaining a strong dollar (what's the meaning of these pronouncements--Brad?). Most importantly, too much should be made about the size of the current accounts deficit in predictions of US dollar movements--Krugman just ignores the counter evidence. Imbalances are now more easily financed by flows of private esp for the reserve center. Even Germany's mark appreciated after 1990 though the current account deficit swelled due to unification. And the dollar appreciated in the early 80s as the current account deficit rose then too. Moreover, the US has been in continuous current account deficit throughout the 80s and 90s. The dollar has fluctuated, but the exchange rate movements have bore little relation to current account deficit. See discussion in Robt Solomon, Money on the Move, p. 144-45
> And don't
>forget the EU - they could bring capital home too, and what could the
>U.S. do? Not to mention U.S. investors, who could diversify out of
>domestic assets if the dollar weakened.
Seems likely to me than likely but what the hell do I know?
> And he's probably
>right about Japan too - why not monetize bond debt? What do they have
>to lose at this point?
Doug, what would this entail?