Clyde Prestowitz is a thoughtful observer of the global economy. Fans of his work can now keep up with his thinking at his new blog at Foreign Policy. Here’s an excerpt from his first post:At present, virtually all the world’s economies are attempting to grow and create jobs by exporting primarily to the United States, which, despite the recent economic crisis, high unemployment, and a fragile recovery, is still acting as the world’s buyer of last resort. But with its budget deficits, and global indebtedness rising and true unemployment hovering around 17 per cent, the ability of the United States to continue this role while also acting as the global security provider is questionable. Similarly, the ability of China and other high-growth emerging economies to maintain growth through ever-rising investment, low consumption, and undervalued currencies is also questionable. Few believe this situation to be indefinitely sustainable.
The fix will require the United States to find a solution to its budget deficits while doubling present household savings rates. It will also require massive investment in the upgrading of U.S. infrastructure and in new U.S. based production facilities. It will require a 40-50 per cent devaluation of the dollar versus the Chinese yuan and some other Asian currencies and a lesser devaluation against the euro, or against a new German deutschmark if the euro should disappear. Indeed, it may require the dollar to relinquish its role as the major reserve currency.
By the same token, Germany, China, Japan, and the east Asian tigers will have to stimulate consumption, reduce saving, investment, relative production, and exports while revaluing their currencies.
Since these changes are not going to be made at Cannes or Honolulu despite their better beaches and warmer water. An economic earthquake or tsunami that will reset globalization is in our future. Stay tuned.
You can read the whole thing here.
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