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The three sectors ... external, domestic private, and domestic public ... have to add up to zero. So what is critical is the direction of cause and effect, and mainstream economics is focused upon telling a "micro-founded" story of cause and effect in which the real causes are in theory ineffective, and so their real effects instead have "micro" level causes.

So, the US suppress worker wages, which suppresses income-financed consumption. The US progressively eases restrictions on debt creation, directly in support of the transactions income from debt creation to the political donors on Wall Street. Indirectly, this leads to trade deficits, which help sustain trade surpluses in China. The trade surpluses in China combined with government policies pursuing high rates of investment require high rates of saving.

Flip around cause and effect, pretend that the high rates of saving in China are a cause rather than an effect in the triple balances, and now the trade deficit is "China's fault", and pursuing balanced trade now requires suppressing wages.


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

by BruceMcF (agila61 at netscape dot net) on Tue Aug 25th, 2015 at 12:52:13 PM EST
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