Monday, October 15, 2007
Savings: The Consequence, not the Cause, of Current Account Imbalances
You write stuff and hope people read it. Clearly the recent discussion on this blog and elsewhere of whether there is a savings glut over there or a savings shortage over here ignores completely the argument I made this year in Challenge. Was my case really that weak?
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Peter - Dean Baker was a forceful advocate of your view. When a couple of Angrybears (Kash and yours truly) weighed in on the low savings causes current account deficit view, our premise was that the exchange rate was the endogenous variable in question. Quite a few economist bloggers reminded we Angrybears of what Brad Setser called Bretton Woods II as in Asian Central Bank mercantilism. So even though I argued the other way quite often - yours is a compelling argument.
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