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The problem is the macroeconomic instability resulting from the tendency of trade balances to grow more lopsided with time. The solution is the introduction of penalties on net exporters. The difficulty is that, until a crisis hits, there is no incentive to do anything, and after the crisis hits the exporter of last resort has everyone else over a barrel.

See: the US at Bretton Woods, China at the G20, Germany in the Euro.

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Tue May 10th, 2011 at 11:03:31 AM EST
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