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Tristan's avatar

I think your argument makes a lot of sense, but I struggle to reconcile it with the empirical points your opponents bring up. You could say there’s concentrated costs to communities affected by offshoring related to employment and dignity/well being, but your opponents would say there are net neutral or even net positive labor market outcomes, with net negative labor market impacts when we try to protect effected industries (what about their dignity?) You could say that persistent CA deficits erode manufacturing employment, but your opponents would point out that employment in manufacturing has been a secular downward trend in most industrialized economies. You could say a reserve currency issuer must run a CA deficit but your opponents might point out that the US during Bretton Woods did not experience persistent CA deficits. There’s so much all being said, and both sides make sense to me in theory, but what are the facts? Is the decline in manufacturing employment due to persistent trade deficits or mostly automation? Are persistent CA deficits mostly explained by the US being the reserve asset issuer, or is this just the standard savings/investment story? Would appreciate any empirical work you can point to. Thanks.

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Joe Potts's avatar

the risky asset less than return on the safe > the risky asset less the return on the safe

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