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Posted by: Michael Mandel on May 11
David Altig has a nice piece about the sustainability of the trade deficit. He fails to note, however, that the deficits are sustainable as long as U.S. wealth, net of debts to foreigners, continues to grow—which it has been doing (take a look at my post from a couple of days ago).
That is, the real constraint on the U.S. is whether we are drawing down our wealth at home, not whether we building up too much foreign debt.
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