>I would be a bit more cautious about dinging
>the twin deficits theory, if I were you. Certainly it
>looks pretty empty today with humongous budget
>surpluses and trade deficits coinciding.
Hey, you take your targets of opportunity where you find 'em.
Cheap opportunism aside, though, what's that law that Paul Davidson always cited, Thirlwell's? That a country growing faster than its trading partners should see a deterioration in its trade account? That seems to be the cause. If the fiscal deficit increased U.S. growth in the 1980s, you could say it "caused" the trade deficit, but it wasn't the proximate cause. I remember interviewing Benjamin Friedman when his Day of Reckoning book came out. I asked him if he wasn't overdoing the budget deficit->trade deficit thing, given that the UK was running a big trade deficit and a budget surplus at that very moment. He said he didn't know the UK was doing that. The things you don't have to know and still be a Harvard prof!
But what I was really going after was the failure of the trade deficit to narrow when the budget deficit did. There's a lot less interest among the opinion-making class in private borrowing than there is in public borrowing; presumably private borrowers are always wise and virtuous and public borrowers are stupid and destructive.
Doug