Another good article by Andy Xie,
How the monetary stimulus will lead to a bigger U.S. trade deficit – and why its intended effects will be obliterated by outdated policy
The best strategy for developed economies is (1) slow growth for wealth preservation and (2) income redistribution to maintain social stability. The U.S. continues to believe that the solution to unemployment or too little income at the bottom is growth. This is why it continues to stimulate despite its large current account deficit. It tries to fix the latter by manipulating the exchange rate. For Geithner and Bernanke, the game will be up when the treasury market takes a sharp turn south
Entry filed under: Watch your step.