Trambunums puts lipstick on politics

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Last week I have tried what some people are doing as “washing” the international economic policies of the Trump administration. In other words, I asked whether there was logic and evidence behind his administration members, especially Stephen MiranThe Chairman of the Economic Advisors, argues.

Professor Berkeley Brad Delong Additions that this accidental: “To make deals, you need to consider your opposite parties to you a guard guard. Donald Trump explains, every day, he is not.” I agree – and I said that.

However, one can still ask whether the important policy problems can be seen here, and if so, what one might do about them. thus, Scott betThe treasury minister argued, earlier this month, that in addition to providing global security, “the United States. Likewise, Miran argues that the dollar has been appreciated chronic, which” was largely weighed on the American manufacturing sector while benefiting from the financial sectors of the economy “for the richest Americans.

Miran’s starting point is with the argument of Robert Trevin since the 1960s that the demand for foreign currency reserves has created trading and trade associated with trade and current account. However, this is not the only way for countries to collect currency reserves. like Morris OtefieldThe chief economist in the International Monetary Fund is arguing in a blog of the Peterson Institute for International Economy, foreigners can replace other foreign assets of property in the United States. And do not keep the only reason for the purchase of American assets. like Paul Crowgman Note, they may just want the assets for us.

However, the demand for reserves was sometimes an important factor in the global balance of payments. Its total value jumped nearly seven times from 1999 to 2014. This was largely driven by the desire of emerging economies to protect themselves from future financial crises. However, in the case of China, the largest individual holder, was also caused by the desire to find an outlet for its excessive revolutions and generate the export -led manufacturing growth. Meanwhile, the euro area, one of Trump’s other goals, increased its reserves by only $ 72 billion between late 1999 and late 2024 (see plans.)

The main forces are more than the desire to collect reserves at work as well. These are differences in tendencies to save and invest. Some countries have surpluses of savings on investment, and thus will run on the surpluses of the current account and match the deficit of capitalist accounts – and vice versa.

This is not necessarily a problem. But problems may arise. One of them is that the average capital system around the world generates crises. The only countries that can manage such crises safely are those whose local money is also a reliable reserve currency. This has been one of the good reasons why policymakers in emerging countries often seek to operate the current account surpluses.

Another reason is that if a country runs these surpluses, it will also produce surpluses of goods and services that are traded on local consumption and vice versa. Therefore, it is not a coincidence that economics have high savings rates, such as China, Germany and Japan, relatively large manufacturing sectors, while the United States and the United Kingdom are in opposite position (although another factor of the latter is that they are good in producing export services, which reduces manufactured exports).

In general, then, the countries obsessed with manufacturing also tend to be consistent with the surplus. Therefore, commercial experiences in this administration, including Trump, are not wrong: if the United States has a running surplus, its manufacturing sector will be already greater. But they have died in the belief that this is only related to reserves. It also does not properly address the conditions necessary for such a balance.

If the United States wants to cancel its current account deficit without sacrificing investment, it will need to raise its savings rate by at least 3 percent of GDP (or about 850 billion dollars). This will be close to half of the financial deficit. As it happens, according to Kimberly East From the Peterson Institute for International Economy, the revenue tariff is 50 percent, can generate $ 780 billion annually. Moreover, such a tariff can improve the conditions of American trade, by reducing the relative prices of imports. But it will be a decline and has negative effects on global and local economic activity, including by harming Military exporters. However, Trump seems unintended in a way that cannot be in such a comprehensive policy.

Therefore, the big question remains: How does Trump Technocrat expect that the required macroeconomic amendments will occur? The proposals made by half of the bread. Forced transfer plans for public debt and non -logical external consumption, unless the goal is to use an inflation tax. The United States tried this in the 1970s: it ended badly!

More importantly, what is this? Yes, if it is possible to cancel the current account deficit, the manufacturing sector will be slightly larger. But the parts of concern to security or any other deeper purpose will not necessarily be the ones that have grown. Moreover, nothing can prevent a long -term decrease in the employment share in manufacturing. Manufacturing is on the path of agriculture: Increased productivity will win.

Even in the most advanced, then, Trumponum Unrelated and non -coherent. The true version of life is worse.

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