Dean BakerAl Jazeera America, May 5, 2014

Dean Baker
Truthout, May 5, 2014

Mark WeisbrotÚltimas Noticias, 4 de mayo, 2014

Mark WeisbrotThe Guardian, May 3, 2014

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I agree with everything Dean Baker has to say in his post on the NYT article on changes in living standards of low-income people, but have a few additional thoughts. Reporter Annie Lowrey is mostly right to say that: “despite improved living standards, th

May 2, 2014 (Jobs Byte)

Eileen AppelbaumForbes, April 29, 2014

Following the NYT, the Washington Post had an article on Bill Clinton's economic legacy today. And like the NYT piece yesterday, the Post did not mention the soaring trade deficit. (See my complaint about the NYT piece here.)

This is not a small matter. The trade deficit was less 1.0 percent of GDP when Clinton took office, it was almost 4.0 percent when he left, and headed upward.This increase would be equivalent to more than $500 billion in today's economy.

And this increase was largely a result of Clinton's policy. His team pushed a high dollar policy and put muscle behind it with the bailout they designed for the East Asian financial crisis. A high dollar leads to a trade deficit in the same way that high meat prices lead to fewer hamburgers being sold. A high dollar makes our goods and services relatively more expensive in the world economy, therefore we sell less of them.

The resulting trade deficit creates a huge hole in demand. For arithmetic fans, demand is equal to consumption, investment, government spending, and net exports:

Y = C+I+G+(X-M)

If we have a big trade deficit then we have to make it up with one of the other components of demand, otherwise we have a shortfall in demand and unemployment. This is not whacko lefty thought, this is the simple economics that is taught in every intro class.

In the 1990s we made up for the trade deficit with the demand generated by the stock bubble. Consumption soared based on the stock wealth effect (people increase their consumption as they see the value of their stockholding increase) and there was also an uptick in investment as the dot.com crew could raise billions for nonsense plans by issuing stock.