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Notes to myself, possibly of interest to others.
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Monday, May 9, 2011

Krugman explains international monetarism

Advanced countries, very much including the United States, are weighed down by the aftereffects of the 2008 financial crisis; this has led to low investment returns. Meanwhile, emerging markets are in much better shape, so capital wants to go there

And this creates a problem for the EMs [Emerging Markets]. They don’t want their currencies to rise sharply,,,But not letting the currency rise would be inflationary...

All those accusation of hooliganism [Putin], currency wars etc. are in effect demands that the [problem] be resolved by having America give up having an independent monetary policy — basically, that the Fed give up on trying to stabilize the US economy so that emerging markets aren’t faced with the uncomfortable tradeoff between massive appreciation and imported inflation...

All that we’re seeing is the classic set of tradeoffs that any currency regime faces — and it’s not the business of the Fed to save other countries from the necessity of making choices.  [source]

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