Also, interest rates are a very, very weak determinant of investment. On Fri, Jan 18, 2002 at 12:02:21PM -0500, Doug Henwood wrote: > Rakesh Bhandari wrote: > > >(2) what happens if in running deficits, the US sucks up global > >capital, raises interest rates, and visits catastrophe on poorer > >nations? is this possible? > > You're assuming that deficits drive up interest rates. There's no > simple relation between deficits and interest rates. If deficits rise > because of a weak economy - either passively, because of lower > revenues, or actively, as a policy choice - then government credit > demand could be offset by weaker private credit demand. > > And you're also assuming that the U.S. doesn't use the borrowed money > to buy imports from poorer countries. Considering that every item of > clothing I'm wearing was made in a poorer country, and that the > computer I'm typing on was assembled in Mexico - not to mention what > we know from the trade stats - that seems wrong. Demand from the U.S. > has stimulated the economies of Latin America and East and South Asia > more than any interest effect. > > Doug >
-- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
