Fed Chief Says Trade Imbalance Helped Cause Crisis

Dave Johnson

Here is some news for you: Fed Chief Cites Trade Imbalances’ Role in Crisis,

Ben S. Bernanke, the chairman of the Federal Reserve, said on Monday that global trade imbalances played a central role in the global economic crisis and warned that both the United States and fast-growing Asian nations needed to do more to prevent them from recurring.

[. . .] Asian countries needed to rely less on exports and more on their consumption at home for their economic growth. One way to increase Asian household consumption, he said, would be for countries like China to increase social insurance programs and reduce the uncertainty that currently hangs over many consumers.

In July I wrote a post asking, Did Free Trade Cause The Recession?,

For many years the world has suffered under a “free trade” regime that eliminates good paying jobs in every country, sending the work to countries that keep wages low and restrict workers’ ability to organize for a better life. The profits went to an already-wealthy few and the inequities increased, wealth concentrating massively at the very top.

And now consumers around the world have run out of money. This is not a surprise. Did these trade policies cause the recession?

Bernanke’s job is to see the issue in terms of money flows. Regular people see it as jobs. They can turn out to be the same thing, if the money flows are shared and reach the regular people. But when they don’t and are concentrated among a few, be it a wealthy few corporate insiders or a country that is trying to take over all of the world’s manufacturing for itself, regular people lose.

Bernanke is urging China to start consuming. This can mean jobs here – IF China adjusts its currency and starts to let their people buy things we make. Of course, that could also mean sucking up what is left of the planet’s resources if it isn’t managed in a thoughtful way.

He is also urging America to reduce our budget deficit. Of course, the huge budget deficit comes straight from the Reagan/Bush tax-cuts-for-the-rich. Is he endorsing a return to the 90% top tax rate that led to a stable economy in the past? If so this solves a lot of problems, reducing the incentive for executives to think short term, rebuilding the reliance of companies on local infrastructure. as well as funding that infrastructure again.

But if it is just more short-term thinking for short-term profits at the long-term expense of the rest of us, it will just be more of the same. And if the Wall Streeters remain in charge of the decision-making, this is what will happen. Sigh.

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