Should-Read: Noah Smith: The U.S. and Japan Don’t Have a Trade Problem
Should-Read: Noah Smith: The U.S. and Japan Don’t Have a Trade Problem: “When Japan buys U.S. bonds, stocks, or car factories…
…and the U.S. fails to do the same in Japan, it pumps up the trade deficit. Japan’s government has been a big buyer of U.S. bonds…. Should the U.S. demand that Japan sell off some of these holdings?… But Japan dumping U.S. bonds could also lead to higher interest rates in the U.S. If the Federal Reserve were unwilling to… fill the gap by easing monetary policy… that could slow the U.S. economic recovery. A far better strategy for reducing trade deficits would be to get the Fed to hold off on its tightening plans…