Money creation

Rakesh Bhandari bhandari at Princeton.EDU
Mon Apr 10 19:30:41 PDT 2000



> It seems to me that we have to re-think our equillibria here. The U.S.
>economy has supported almost fanatic borrowing very easily so far with
>government deficits (if not debt) shrinking (or at least slowing their
>growth) even as trace deficits balloon. I think it must be that debt is
>more a force for economic good than we realize.

I don't know, boddhi. The extension of credit on the basis of a deposit base built on inflow of foreign money earned from US net imports may be critical source of global demand or to put the same point (i think) differently, without ability for the US to tolerate a run up of net indebtedness, global economy may founder on insufficient effective demand. But doesn't this deprive the underdeveloped countries of foreign capital that could have been used to fuel their growth? Yours, Rakesh



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