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Guardian - John Ross -

Pelosi does not seem to appreciate, however, that the US cannot profitably produce the goods it imports from China. If tariffs were imposed, similar low-price products would be imported from India or Mexico. No American jobs would be created. Indeed, a trade war would lead to a net loss of American jobs. Any country hit by tariffs invariably reciprocates, and China would act against competitive US industries such as farm products and hi-tech.
A much more attractive future, he argues, "requires a national industrial-restructuring programme in which the government would invest in 21st-century technologies with the goal of establishing an unassailable American lead".

If the economics of this proposition are so simple, why doesn't it happen? As George Soros explains, it is because of American anti-statist ideology: "The imbalance between consumption and investment must be corrected ... The obvious solution is to distinguish between investments and current consumption, and increase the former while reducing the latter. But that seems politically untenable ... a quarter-century of calling the government bad has resulted in bad government."

The fact that some US politicians' economic arguments are confused is because they have created a situation whereby America has ample finance but no mechanism to turn it into investment - consequently it remains in economic stagnation. Instead of creating a scapegoat in China and proclaiming "currency wars", the way out is to address the US's real economic problems.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Fri Oct 15th, 2010 at 07:01:52 AM EST
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