Sunday, October 16, 2011

The Trade Deficit

Dean Baker says :

...the U.S. is currently running a trade deficit that is equal to 4 percent of GDP and would rise to closer to 6 percent of GDP if the economy were at full employment. This is not sustainable unless we think that countries will give us their products for nothing indefinitely.

Since there is nothing to replace the dollar internationally as a supposed store of value, there is no reason to believe that the deficit will reach equilibrium any time soon. This virtually guarantees the continued decline in the financial condition of the U.S. working class, who have since WW2 functioned as the world's buyer of last resort, the absorber of global overproduction. Therefore, the crisis of 2008 was just a beginning. At some point the US government might very well tell the various SWF's of the world that the 0's on their computer screen are worthless. Default. Capitalism has not resolved its contradictions.

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