ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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What Is Driving Global Deflation and How Best to Fight It

While the United States' emphasis on reviving banks and public spending are both important, neither addresses directly the main source of deflation, which is that the global imbalances are no longer being recycled effectively. The basic problem is not the imbalances per se, but the unsustainable way financial deregulation and neoliberal global order absorbed and recycled them. The us has lost much of its capacity to either absorb or recycle trade surpluses generated elsewhere. So, in addition to reasserting public control over the credit creation process, the us has to be prepared in case the dollar plunges in value, and focus on how to resume the recycling of trade surpluses before contraction begins to destroy them. The global monetary standard and thus the integrity of monetary reserves need to be safeguarded, and a recycling of trade surpluses would wean world demand away from its dependence on us overspending without the world getting stuck in a depression.

Korkut Ertrk

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