Good post, but I wish he'd move on past that 1993-ish way of "underlining" words. That's what HTML's for!
Bill Conerly
· 3 years ago
"Americans have been recklessly borrowing against their assets to buy consumer goods; hence the trade deficit & capital inflow."
Looking at the composition of imports does not refute that statement. We can be importing capital goods simply because we have shifted domestic production to consumer goods.
Refutation of the statement requires a look at how we're spending our money. How about this: Over the past 10 years, real consumer spending has grown at an annual rate of 3.7%; real business fixed investment has grown at 4.9% annual rate; real residential investment at 5.2% rate. We come to the same conclusion.
spencer
· 3 years ago
Supposedly we import and export what we do because that is what we have a comparative in.
It does not have anything to do with whether or not we are over or under consuming or investing.
Alexei McDonald
· 3 years ago
Surely the rises in oil and other commodity prices would cause industrial imports to rise as a proportion of the whole, even if actual quantities of materials imported remained unchanged? If so, you can imagine a scenario where consumer imports were increasing modestly, but were counterbalanced in the figures by an oil price increase.
triticale
· 3 years ago
Bad analogy. The convenience of an ATM may encourage reckless cash flow, but it only provides access to liquid funds.
Aaron Krowne
· 3 years ago
Brad Setser has already dismantled these arguments:
All Comments
Good post, but I wish he'd move on past that 1993-ish way of "underlining" words. That's what HTML's for!
"Americans have been recklessly borrowing against their assets to buy consumer goods; hence the trade deficit & capital inflow."
Looking at the composition of imports does not refute that statement. We can be importing capital goods simply because we have shifted domestic production to consumer goods.
Refutation of the statement requires a look at how we're spending our money. How about this: Over the past 10 years, real consumer spending has grown at an annual rate of 3.7%; real business fixed investment has grown at 4.9% annual rate; real residential investment at 5.2% rate. We come to the same conclusion.
Supposedly we import and export what we do because that is what we have a comparative in.
It does not have anything to do with whether or not we are over or under consuming or investing.
Surely the rises in oil and other commodity prices would cause industrial imports to rise as a proportion of the whole, even if actual quantities of materials imported remained unchanged? If so, you can imagine a scenario where consumer imports were increasing modestly, but were counterbalanced in the figures by an oil price increase.
Bad analogy. The convenience of an ATM may encourage reckless cash flow, but it only provides access to liquid funds.
Brad Setser has already dismantled these arguments:
http://www.rgemonitor.com/blog/setser/151508</b...>
Give it up, Don. This is getting desperate... like trying to argue that global warming isn't happening. The fundamentals are pretty obvious here.