[...]It's the Tinkerbell Economy.
So what would a prudent U.S. government be doing right now?
+ We're in the up-phase of the business cycle, so we should be running a budget surplus in any event, considerations only reinforced by the unsustainable current-account deficit.
+ We should be making it very clear that as a deficit country we value foreigners who want to invest in us--that we are grateful rather than xenophobic when we think about foreign capital.
+ The Federal Reserve should be making it clear that it is more interested in stabilizing measures of domestic prices than of measures that have a high weight on import prices.
+ International consensus on what to do should market prices move, and should demand for the products of 40 million Asian workers in export industries and 10 million American workers in construction and consumer service industries disappear.
Are any of these things happening?
Still, we're probably going to be OK. Opportunities, not crises.
Tuesday, March 14, 2006
Brad DeLong Is Clapping Louder
He writes at the end of a long draft for a lunchtime talk about economic policy: