--- Doug Henwood <dhenwood at panix.com> wrote: > I find
this argument from Wynne Godley completely
> convincing:
>
> >It is impossible to over-emphasise the fact that
> the entire fiscal
> >plan which the authorities have set out, since it
> combines a rising
> >budget surplus with continued economic growth, can
> only form part of
> >a coherent macroeconomic strategy on the assumption
> that private net
> >saving continues to fall into increasingly negative
> territory. If
> >saving does not continue to fall - if private
> expenditure rises less
> >than income in the years to come - this must (by
> the laws of
> >accounting) be accompanied by some combination of a
> deteriorating
> >budget and an improving balance of payments. And
> this could only
> >happen (given fiscal stance and trade propensities)
> if aggregate
> >demand and output were to stagnate or collapse.
> Without a continued
> >stimulus from private expenditure in excess of
> income growth, there
> >would be nothing to keep the expansion going.
>
> Is there anything wrong with this? Is there another
> possible outcome?
> Or do normal accounting identities not apply to the
> USA?
>
> Doug
"Given trade propensities" looks like it conceals a bit of fancy footwork (I'm in our Tokyo shop this week and haven't been able to read the article). It is not, quote, impossible, that the New Economy and associated productivity revolution might vastly increase US non-price competitiveness, open up new markets, blah, blah, Internet, blah, and square the circle by changing the equilibrium relationship between domestic demand and the current a/c balance. No, I don't think it's particularly likely either. But that's the escape podule for bulls.
dd
===== "The banker must at all times affect a respectability that is more than human ... for this reason, he is typically the most romantic and least realistic of men"
John Maynard Keynes
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