[lbo-talk] Recent Growth & Bush's Economic Policy

JW Mason j.w.mason at earthlink.net
Tue Dec 23 09:28:39 PST 2003



> But this can't go on forever - something's got to give. The U.S.
> can't keep running current account deficits this large forever, and
> foreigners won't accumulate dollar claims forever either.

Why on earth not? As long as the dollar plays the role of world money, you'd expect demand for dollars to expand roughly in line with world trade. So yes, the US can run big current-account deficits forever, just the way gold-exporting countries could under the gold standard. In fact, it has to -- this is what's called Triffin's dilemma, I think.

And since liberalization means countries need larger reserves to protect their currencies, the size of the required US current account deficits is probably going up rather than down.

Josh



More information about the lbo-talk mailing list