House of Paine

take a note ...

 imagine a global  trade crisis 
 where the only....yes only
 way  to promote recovery
required 
each and every state 
 to run a seriously larger 
fiscal deficit...
 
in order to stimulate 
their own ....imports 

help me jeeves !!!!

this type
     of
 joint  policy Rx

 the globe's nation states
               ain't ready for 


==============================
  



when it comes to trade policy at the national level
  there's a woefulbut very reasonable  lack 
of both way traffic here
stimulating imports is a no no

stimulating exports a good y goody

now everyones imports are someone elses exports 

you got a co ordination problem here


the 30's show most clearly 
if the trading system 
starts to fall apart

its hard to re lift
impossible  in fact 
  by use of 
forex games alone 
and if states put themselves for whatever reason under credit constraints
too stiff to allow big enough fiscal deficits 

the uneven ness of the various sub optimal 
national responses
 will feed back on the  system
sending 
the bigger deficit players
into fiscal contraction
whether out of
  an " we're not suckers "  syndrome
 or 
a "we're headed for a debtor trap" panic

let me remind you

el teo rico hiself

yes  unclesam
 finds  such voices raised 
 right here right now 

--------------------------

the problem is obvious:

    
when policy 
stimulates  your exports 
you get the first big lift 
of course
 you'll buy more overseas too
increase your imports 
as your income is lifted by the higher exports 
but to a lesser degree 

to restate:

 you  ultimately stimulate 
your neighbors exports 
less when you act unilaterally 
to stimulate  your own

to relift a trade system in the doldrums
some body has to increase their imports 
only 
thru net increases in your imports
 will your add net  income  to the rest of the systems
 players

thru trade altruism in other words

 added imports creating other folks
added  exports 

and hence a virtuous lift  cycle 
may get under way 


but to say the least
its hard to take 
the secondary benefitas compensation
for the big overseas buy
involved  at first crack

 hey if along the way 
the system  evolves
into a state where one big national net spender 
is the engine  pulling  all wagons ....
what happens when the big spender's boiler blows

or more likely 
he either  scares himself 
or others force him 
into
putting on the brakes 
and the slack is not taken up by others  ?????

-----------------------------------
the altruism involved in deliberately 
improving your neighbors exports
by worsening your trade balance 
  is not a policy of uncle sam today
its a reality 
thats bitched at by way too many ignorant 
 side walk supers 

 its a co ordination thing guys

get a replacemennt set of big spenders 
before you force uncle to the slow lane 

-----------------
imagine the euros trying this on ...

 okay fellahs
we   all together now
 run these deficits domestically 
feed purchases out  to the rest of the world 

and  as our imports rise
and our imbalances grow 
the world will rise too ...

before the fool gets to add
and eventually the other guys 
will  start to import faster
 then us and we'll close the gap
maybe even reverse he flow awhile..."

no that won't get out

before the euro chattering klass 
throng hurl em down into
 to the dark and deep pit 

the globe is not  unitary  enough 
        by a long shot 
                      eh ???