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In a financialized economy it seems that trade surpluses almost always turn into asset bubbles -- somewhere. In the 70s Saudi surplus "petrodollars" were "recycled" through US banks, such as Citi, who then loaned them to Argentina, etc., leading to "The Latin American Debt Crisis": Saudi surpluses through US banks to Latin American bubbles.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Jun 8th, 2011 at 04:26:51 PM EST
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Not necessarily.

If a country's primary trade deficit is less than the difference between its sustainable growth rate and the interest it pays on its foreign debt, the foreign debt will converge to a stable level.

But you don't hear so much about those cases, because they don't make headlines by going boom every ten years.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 8th, 2011 at 06:32:01 PM EST
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