... is that if an economy has exhibited some characteristics ... "the US economy is so flexible and innovative" ... it will continue to exhibit it, and if only the government will stop intervening it will exhibit its intrinsic features that much more strongly.

When in reality the policy push for more "flexibility" in fact undermined much of the social infrastructure that gave such strong support for the "innovation", so the idea that those were intrinsic "natural" features of the US economy, entirely independent of government policy in terms of providing social infrastructure, was just wishful thinking.

The Chinese government, first and foremost, wants to avoid the mass unemployment that would result if growth dropped down to a sustained rate of 3% or 4% ... so, yes, of course they are not happy with every consequence of their current policy, but they are only going to move to an alternate policy if they think that either the growth potential of the current policy regime has run its course, or that there is an alternate policy regime that offers at least the same growth potential and other benefits on top.

On the US current account, no, the trade deficit with the neo-mercantalists do not directly account for the whole trade deficit. However, between the direct trade deficits with the neo-mercantalists and the side-effect on the US trade deficit of the artificially high value of the US$ that the neo-mercantalist pegs helped to maintain for so long, a lot of the push of the current account deficit beyond a sustainable range certainly can be traced back to the neo-mercantalists.

The other side of the push of the current account deficit into the unsustainable range is, of course, the ever-increasing sectoral deficit in energy. That was rising on the back of increased volume of net energy imports, and is now getting further amplified by the decline in terms of trade for energy importing nations.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.