November 11, 2015
Eduardo Porter had a good piece in the NYT today about how India’s development needs are likely to lead to a massive increase in its greenhouse gas emissions over the next two decades. This is an interesting issue to think about in the context of secular stagnation.
The problem of secular stagnation is that the United States and other wealthy countries are not creating enough demand to fully employ their labor forces. A great way to increase demand in the U.S. economy would be to pay India to develop using clean energy instead of coal. In effect, the U.S. and other wealthy countries would be covering the difference between the cost of using wind and solar energy. This would both curb emissions and also address the problem of secular stagnation by creating more demand.
Yes folks, I know that India may not buy the wind turbines and solar panels from the United States. But, if we put more dollars out into the world economy, it should drive down the value of the dollar, which will make our goods and services more competitive internationally. This will improve our trade deficit. (Of course, that assumes that other countries’ central banks may choose to hold these dollars to prop up the dollar against their currency. If the United States were not such a weak country, we might be able to use our influence and power to deter this sort of currency management, but the artificially propping up of the dollar would be a real risk, which would limit the extent to which the U.S. would see additional demand.)
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