12.31.2008

The coming trade war?

This is the warning given by Yves Smith of Naked Capitalism. The United States has been the willful consumer of first and last resort during much of the post-war era. However, it may not want to occupy that role in the future and may be unable to do so in any case given its growing debt and the current economic situation. As a matter of fact, the dollar continues to weaken and the United States may wish to increase its exports in the near future. But, if every country, including the United States, tries to export its surplus, which country would absorb the world's surplus if not a rich country like United States? It is clear, though, that this system logic could produce a world-wide trade war as every country attempts to survive the global crisis by increasing its exports.

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