Tuesday, October 26, 2010

Obamanomics Reaching Its "Logical" End

Representatives of the world’s largest economies, meeting in South Korea, reached tentative agreement early Saturday on the need to rein in trade imbalances, as part of an American-brokered compromise on calming exchange-rate tensions that have threatened to disrupt the uneven global recovery.

The Obama administration on Friday urged the other economic powers that make up the Group of 20 to agree to curb persistent surpluses and deficits that could contribute to the next financial crisis.

The proposal, which included a numerical limit, was backed by South Korea and quickly drew support from Britain, Canada and Australia.


On its face, of course, such a goal is as preposterous as the lofty CO2 emissions goals of the Kyoto Treaty. Who will measure it? And who will enforce it? No one.

And how could a nation's government, seeing that its citizens were approaching the trade deficit goal, actually do something about it? I suppose it could impose punitive tariffs -- but punishing one's own citizens through higher prices and sparking trade wars with allies won't be an attractive political proposition.

The obvious solution to the supposed problem of global trade "imbalances" is for central banks to stop inflating their currencies and toying with interest rates. With stable money and interest rates that reflected the relative scarcity of capital, foreign exchange would begin to reflect actual PPP and each country could finally discover where its true comparative advantages lie.

It's just too depressing to realize that highly-paid and supposedly-skilled diplomats and economists are filling their time by coming up with crap such as this -- and that they take it seriously.

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