Time for a Plaza II

Editor’s note: This is an extremely important article by economist Richard Koo describing in very clear terms the relationship between exchange rates, capital flows, and the trade deficit. Publication: “International Economy, Summer 2019“. The takeaway is that until the US manages capital flows and exchange rates, we are destined to have trade deficits and deindustrialization forever.

U.S. trade deficits were caused not by American extravaganMce but by misaligned exchange rates.

[Richard C. Koo | Summer 2019 | The International Economy]

Read the original article here.

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