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The U.S. saving deficiency, current-account deficits, and deindustrialization: Implications for China

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  • McKinnon, Ronald

Abstract

In the United States, both private and governmental saving dropped sharply after 1980 in contrast to the preceding postwar decades. But investment in the America economy has held up quite well (except for the 2008 banking crisis) because of heavy borrowing from foreigners as manifested in the trade deficit. But what is cause and what is effect? The problem is that the Federal government faces an ultra soft borrowing constraint because of the dollar's central role in the international monetary system. Since 2002, Emerging Markets on the dollar standard's periphery have voluntarily bought—or being forced by hot money flows to buy—more than $6 trillion of foreign exchange reserves.

Suggested Citation

  • McKinnon, Ronald, 2013. "The U.S. saving deficiency, current-account deficits, and deindustrialization: Implications for China," Journal of Policy Modeling, Elsevier, vol. 35(3), pages 449-458.
    • Handle: RePEc:eee:jpolmo:v:35:y:2013:i:3:p:449-458
    DOI: 10.1016/j.jpolmod.2013.03.008
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    References listed on IDEAS

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    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Ronald McKinnon & Gunther Schnabl, 2012. "China and Its Dollar Exchange Rate: A Worldwide Stabilising Influence?," The World Economy, Wiley Blackwell, vol. 35(6), pages 667-693, June.
    3. Ronald I. McKinnon & Kenichi Ohno, 1997. "Dollar and Yen: Resolving Economic Conflict between the United States and Japan," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262133350, April.
    4. Qiao, Hong, 2007. "Exchange rates and trade balances under the dollar standard," Journal of Policy Modeling, Elsevier, vol. 29(5), pages 765-782.
    5. McKinnon, Ronald I., 2013. "The Unloved Dollar Standard: From Bretton Woods to the Rise of China," OUP Catalogue, Oxford University Press, number 9780199937004.
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    Cited by:

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    2. Eberechukwu Uneze & Adedeji Adeniran, 2014. "Exploring Domestic Financing Options for Post-2015 Development Agenda in Selected Sub-Saharan African Countries," Southern Voice Occasional Paper 18, Southern Voice.

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