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Wangja
Joined: 17 May 2004
Location: Seoul, Yongsan
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 Posted: Sun Oct 16, 2005 4:36 pm Post subject: The US Economy |
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From several strident posters here we hear much here about how well the US economy is doing. But is it really doing that well? An interesting letter to The Economist this week raises an intriguing analogy.
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In for a penny
SIR – I read your survey on the world economy with some interest (September 24th). I was particularly struck by the similarities between the issues facing the United States today and those being hotly debated in Britain in the early 1960s. Then, the debate turned more on the problems caused by sterling as a reserve currency than on investment and savings imbalances. Nevertheless, at that time Britain was a relatively rich and flabby country that had lived beyond its means for many years and had its investment and trade deficits financed by the (then) sterling area, probably to the disadvantage of the countries concerned (a similar relationship exists between America and China today).
The eventual outcome was a faltering economy brought on by a series of trade balance crises leading to an inexorable devaluation of sterling over a long period. Much of the damage was caused by Britain's inability to macro-manage its economy through interest rates because of the influence and conflicting objectives of international holders of sterling. Remember the ��gnomes of Zurich��? The process finally left Britain poorer, but leaner and meaner and at last able to successfully macro-manage its economy untroubled by external reserve-currency issues.
Could this portend the future for the United States?
David Scott
Loughborough, Leicestershire
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http://www.economist.com/displaystory.cfm?story_id=5016886 |
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hypnotist
Joined: 04 Dec 2004
Location: I wish I were a sock
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| Posted: Sun Oct 16, 2005 5:37 pm Post subject: |
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I read that, very interesting.
Was Britain <i>really</i> rich and flabby in the early 60s though? (I'm far too young to know!) I know it was post-austerity but still, the country was decidedly second fiddle to the US economically even then, shirley? |
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