Trade deficits reduce economic growth, according to a theory posited by the great 18th-century Scottish economist and philosopher David Hume. The outflow of gold to pay the shortfall (trade deficit) would contract the money supply and automatically lead to the reduction of domestic prices as if by an ‘invisible hand.’
Phase one of the coronavirus-induced economic shock happened with stocks falling 20% and the government and high-grade corporate bonds rallying.
Money creation in the modern economy involves mostly private commercial banks and little to do with the U.S. government.
Greece has seemingly weathered its financial crisis, but the fundamental problem with the Euro of who creates its money remains.
Exports, the whole world, cannot increase them because someone has to buy them. And it can’t be just the U.S. consumer who buys them.
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