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By John Crush

Climate change, one of the planet earth worst conditions. Whipping us with its extreme climates, its droughts, floods, landslides and other disasters. No corner of the earth has not suffer at least a little by this change that earth has been suffering. ¿And whose fault is it? The human being.
Our race, supposedly superior, destroys everything seeking their own comfort, but, forgetting the welfare of other species. And yet, we forget our own welfare. How is it that among ourselves, instead of supporting us as neighbors, we turn our backs, forgetting that we all have the same needs?

We forget that this earth is our own, we all live here, and this is our home. Everything we do will affect us in the future, not at all distant. We have become a very selfish race. We exploit among us, only to gain wealth, forgetting that in the end this land is the only place we can live in, and we should take every effort to make this our only home, stay up, and keep it functional for decades and decades.

How is it possible that as a race, we prefer to give us back rather than reach out and give us help?, For example, much is said of the little freedom that Cubans have to manage their property, their economy and that they use old cars and their houses are old and neglected, but very little is mentioned about that health is free and education is mandatory. I would give my car, my furniture, my cable, my internet, my freedom to buy a pair of jeans or a plasma TV if I want, for the freedom to enter a hospital and be treated for free and with high quality, for the mere fact of being alive and wanting to stay that way.

How can we be so selfish collectively speaking that we do not care about polluting without considering the consequences this will bring to our next generations and even to ourselves. Rather than pull us down and get pushed back, as it has been for centuries, it would be great to think of the benefits we could achieve if we worked together for real.

If we would only departed for the idea of not doing unto others what we would not like done to us. While it is true that the struggle of opposites is what moves the world, working between rich and poor should not be so unequal. The rich depend on the poor for their businesses to operate and the poor from the rich to survive on the wages paid for their work. No one should deny this interaction, but best would be to find the midpoint of the benefit for both parties. That the poor have their basic needs met before even thinking about starting to work.

Unintentionally, and perhaps even without thinking we are carving our own destruction, not to think or respect the environment in which we live and share with all other species. Hopefully is not too late to start over, to try to rectify all the damage that has been done through the years. Hopefully we can even detoxify, find viable alternatives for the environment and instill in the younger generation to respect our land, our home is worth.

By Susana Lima

I do not know how people can comment or make judgments without being sure of what they are talking about. Personally, when I'm not sure about something I prefer to stay quiet and try to understand what people is talking about and if I have any questions, I ask! They well say there are no dumb questions; dumber is the one who don’t asks, because not only they do not remove the doubt, but they denied the opportunity to learn more.

I like to find out more about what I am going to say before I even say it, I feel anxiety and uncertainty when I think I'm going to say something is not right and my judgment will later be challenged by the lack of knowledge that  I didn’t allowed myself to eradicate.

The same goes for the advices, it is best to advise someone based on our own experiences, than based in pure conjecture. Although there are times we preach and do not convert. So what to say when you're not sure of something?, Sometimes you have to sound as politically correct as possible and say, I don’t know, I cannot help you with that, you should better ask someone who knows more than me.

When thinking about writing this article, I could only think about writing something specifically, I mean my opinion should be political, financial or of other items that sometimes even only start thinking about them, I get the sleep you feel when you read something you have to learn for an exam the next day at 2:45 am.

I rather think the general perception of the people of Guatemala regarding the struggle of Otto Perez Molina to promote the decriminalization of drugs. The march towards the decriminalization of marijuana, which i did not attend for reasons beyond me, that I was told, it was full of "hippies" preaching love, peace, tolerance and acceptance.

Many people like me, who could not attend, expressed that with these people with such good vibes and such a relaxed look, they would have liked to see people on tuxes, fathers and mothers, who are known to smoke But it was strange that they did not participate, being themselves arduous consumers and advocates of its use, and with this idea that only hippies and jugglers smoke marijuana, i shoot a question. Why these people did not took to the streets to say that they are free to smoke marijuana, as the one that smoke-free snuff?, Is there so much to lose?, Is it so hard the way this society cross  you out that you are not even able to protest that you could be frowned upon the rest of your life?

I feel somewhat hypocritical always to defend the right to smoke marijuana and at the unique opportunity presented to speak out against repression, most of the people who consume it, have preferred to sit back, watching as other people did it in their places or rows they should be taking.

I think in this society, we should first think about the famous saying that "respect to the rights of others is peace" and it should not stay there. We should respect the actions and opinions of others before imposing our views and reasons. Everyone has an explanation for what they do and we all seek to live the best life possible, among the worst that this system gives us to live.
Search primarily our own good, to give welfare to our family, friends, countrymen. We should be living life with the most basic and real sense of what is "good" and not think about what is good for me which is different from others.

While we educate with the example, the problem is not the vices, religion or lack thereof, or marital status of mother and father. We must put aside all prejudices and see that we are all equal; that we all have and rely on retrieve our basic needs, other than that, everything that comes is worth.

We should realize that we really need very little to be happy, and the little we need, we should be needing it even less, to have a free life, at peace with nature and the world.

We should search a common good in consequence of the individual one, and that my welfare, does not exceed that of another person, another entity, which also shares this land, land that everyone has given us and that we will be removed in the same way.

The goal is to fly ...

By Nicole Sánchez

I share the idea of striving, working and being brave enough to get ahead in a business, company or investment. Most people who start a project, they usually do with a mentality of this kind. One day build in his mind a new idea, they travel at different options, ideas, many times, change colors, shapes, look at options (all still in the mind) and continue thinking about how to achieve success.

Some think the option of growing a business is starting with small things.
Another with greater possibilities, aspire to have a formidable home with a large corporation. But today I want to focus specifically on those big dreams but when maybe the mentality not so huge. Landing a good idea can be a good start but often that vision is clouded by the different situations of crisis around them are not necessarily financial. In one of its many definitions, the Royal Spanish Academy, called a crisis as a shortage or lack of. And that will lack? Is the question: well, from experience in talking with many persons who want to have a business and my own experience, I know the crunch is realy  most of the time is lack of faith, security and certainty, ie that people usually have fear of failure, are afraid of losing your money or invest too much effort and ultimately the business will not work. Another fault may be that negativity that after having a good thing or idea, immediately when come back to reality, becomes contradictory, even paradoxical. And finally the most dangerous of all: The absolute idealization. Lack objectivity when undertaking a business is not a good start. Neither is to relate everything to failure, should definitely be a balance, but necessarily must be  and one of the main ingredients, conviction.

Believe that despite the various situations which are contrary our surroundings, we finally have balance in proportions, half the chances of being successful in whatever we undertake. There will always be risks, not only in business but in life. The experience acquired with a number of successes, but also perhaps with a dose of failures. Virtue focuses on how to overcome fears and mentalizing actually to win, but also be prepared to lose, without turning it into a constant thought. Our main enemies to defeat, rather than in financial markets, initially are within us, a great battle being waged in our thoughts at the time as start or not a project. We must decide by a careful study itself, but without falling prey to a distrust that we will never let go. There are many companies that started from the bottom, and not necessarily all the time were at the top but had consistent success because at some point had to believe and dare to do even though the chances of loss. The real winners are those who take action on their hands despite the headwinds, the real winners are not those who have never lost,  but the despite that they have lost, have managed to get up and have walked, have run and have finally flown.

Everything good and truly great starts in seeds and of course with many pants

The election of Vladimir Putin to a new presidential term in Russia has not liked anything in Washington. Looking at the great free press, or the imperial weapon of psychological warfare, it becomes apparent that the Russian premier is one of the villains that must be disposed as soon as possible. No matter that the U.S. has been the inventor of electoral fraud and beautifully grows it, Mrs. Clinton is calling on Moscow to investigate the "irregularities" in the electoral area in which the benevolent Western foundations and NGOs offer courses and workshops on Russian democracy activists.

Who could predict this hostility against Putin after September 11th? At that time Kremlin gave full cooperation to the U.S. in the "war against terrorism" and a pledge of peace, went as far as deactivating its irreplaceable radio electronic listening station on the outskirts of Havana. Putin had just begun his first term, had not reached 50, and was in the making, it seems, of the geopolitical learning that shown later.

Certainly the former KGB ex-officer had received a country literally in ruins, in need of trade and international cooperation. Psychologically and morally broken by suicidal policies that led to the collapse of the USSR and its consequences: introduction of the most barbarous capitalism, the large auction of public assets, drain wealth pouring westward, reduced social services and living standards population largely thrown into misery, mob control of the economy and the virtual dismantling of the armed forces. Disassembly of a system that accumulated serious social dysfunction and but until yesterday it had achieved a high degree of development of culture, science, social justice and was accepted without question as one of the two world superpowers.

Plunged into anarchy, Russia found in Putin the leader able to impose some order and discipline, and put her up in her feet. Russian nationalism and nostalgia for past greatness seem to be a strong motivation for him and his duet Medvedev. The elected president has said that the demise of the USSR was "the greatest geopolitical catastrophe of the 20th century." From his first term mafia hit, began the restoration of state control of the largest gas reserves in the world and huge oil deposits. Using them as geopolitical weapons and with the second nuclear arsenal, Russia managed to reposition as a world power. Also, rearticulate a system of alliances within and outside the former Soviet space. This went hand in hand with the economic success of China, India, Brazil, South Africa, the emergence of BRICS, the decline of the U.S. and its debacle in Iraq and Afghanistan and the great effort of Latin American integration and independence expressed in the ALBA, UNASUR and the Celac, made all that have weakened the unipolarity and driven the multipolarity. At the same time the Kremlin took steps to restore the efficiency of a state apparatus undermined by corruption, and initiate the recovery of social welfare by taking advantage of high oil revenues.

Russia worked as his trusted ally and U.S. put military bases around her with the justification of the war in Afghanistan, NATO expanded eastward in violation of the Gorbachev-Reagan agreements, they recognized the independence of Kosovo (February 2008), another hostile act, and began preparations for the missile shield against Moscow, a very threatening act with the incredible excuse to protect Europe from Iran.

Russian diplomacy began to realize that they will not tolerate this course of action. Putin said it loud and clear in his speech at the security conference in Berlin in February 2007. And in August 2008 came the withering backlash Moscow Georgian armed forces launched by Washington and Israel against the Russian peacekeepers in South Ossetia. Since then there is a geostrategic shift will deepen the Russian-Chinese rapprochement as seen with the double veto on Syria in the Security Council. Both powers are reset. Putin, together with China and a coalition of independent countries could perhaps avoid the aggression of the U.S. and Israel against Iran and do much for peace and international cooperation.

Source: www.cubadebate.cu

By Fernando Álvarez: Ex IMF Economist

According to information published on January 30, the Inter-American Development Bank (IDB) closed and disbursed a $20 million subordinated loan to Banco Interamericano de Finanzas of Peru (BanBif) that will pave the way for increased mortgage lending. The IDB loan, which qualifies as Tier II under the Peruvian regulation, will contribute to strengthen Banbif’s capital to fund an expansion of mortgage lending to meeting rising demand. The operation reflects a key priority of the IDB’s beyond Banking Program, which aims at democratizing access to finance for segments that have been historically underserved by financial intermediaries.

“We are providing Banbif with long-term funding to enhance its capacity to significantly expand its financing operations in the housing sector, in a profitable, efficient, and sustainable manner,’’ said Daniela Carrera-Marquis, Chief of the IDB Financial Markets Division at the Structured and Corporate Finance Department. “Increased access to financing is key to help Peru to reduce its housing deficit.”

The housing deficit in Peru today both in terms of quantity and quality stands at around 1.8 million dwellings and only one in every 50 Peruvian families currently benefit from a housing loan, a low penetration when compared with other countries in the region, according to Marcelo Paz, the IDB project team leader.

The IDB loan will support BanBif’s strategy to diversify its operations away from corporate banking. Since 2008, the bank began targeting primarily small and medium-sized businesses as well as the middle and lower-middle income segments of retail banking with products such as credit cards, consumer loans and housing finance.

"This transaction bolsters our relationship with the IDB and our pledge to focus our efforts on expanding our housing portfolio in the middle and lower-middle income segments of the economy," said Juan Ignacio de la Vega, BanBif’s chief executive officer.

About the IDB's Structured and Corporate Finance Department

The Structured and Corporate Finance Department (SCF) leads all IDB's non-sovereign guaranteed operations for large-scale projects, as well as those linked to companies and financial institutions. Through its Loan Syndication Program, SCF acts as a catalyst, helping to engage third-party resources by partnering with commercial banks, institutional investors, co-guarantors and other co-lenders for projects with high developmental impact. 

By Fernando Álvarez: Ex IMF Economist

Dr. Nouriel Roubini is Chairman of Roubini Global Economics, Professor of Economics at the Stern School of Business, New York University, and co-author of the book Crisis Economics.  He states that the outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies. Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the Eurozone. And turmoil in the Middle East is causing serious economic risks – both there and elsewhere – as geopolitical risk remains high and thus high oil prices will constrain global growth.

At this point, a Eurozone recession is certain. While its depth and length cannot be predicted, a continued credit crunch, sovereign-debt problems, lack of competitiveness, and fiscal austerity imply a serious downturn. The US – growing at a snail’s pace since 2010 – faces considerable downside risks from the Eurozone crisis. It must also contend with significant fiscal drag, ongoing deleveraging in the household sector (amid weak job creation, stagnant incomes, and persistent downward pressure on real estate and financial wealth), rising inequality, and political gridlock. Elsewhere among the major advanced economies, the United Kingdom is double dipping, as front-loaded fiscal consolidation and Eurozone exposure undermine growth. In Japan, the post-earthquake recovery will fizzle out as weak governments fail to implement structural reforms.

Meanwhile, flaws in China’s growth model are becoming obvious. Falling property prices are starting a chain reaction that will have a negative effect on developers, investment, and government revenue. The construction boom is starting to stall, just as net exports have become a drag on growth, owing to weakening US and especially Eurozone demand. Having sought to cool the property market by reining in runaway prices, Chinese leaders will be hard put to restart growth.

They are not alone. On the policy side, the US, Europe, and Japan, too, have been postponing the serious economic, fiscal, and financial reforms that are needed to restore sustainable and balanced growth. Private- and public-sector deleveraging in the advanced economies has barely begun, with balance sheets of households, banks and financial institutions, and local and central governments still strained. Only the high-grade corporate sector has improved. But, with so many persistent tail risks and global uncertainties weighing on final demand, and with excess capacity remaining high, owing to past over-investment in real estate in many countries and China’s surge in manufacturing investment in recent years, these companies’ capital spending and hiring have remained muted.

Rising inequality – owing partly to job-slashing corporate restructuring – is reducing aggregate demand further, because households, poorer individuals, and labor-income earners have a higher marginal propensity to spend than corporations, richer households, and capital-income earners. Moreover, as inequality fuels popular protest around the world, social and political instability could pose an additional risk to economic performance.

At the same time, key current-account imbalances – between the US and China (and other emerging-market economies), and within the Eurozone between the core and the periphery – remain large. Orderly adjustment requires lower domestic demand in over-spending countries with large current-account deficits and lower trade surpluses in over-saving countries via nominal and real currency appreciation. To maintain growth, over-spending countries need nominal and real depreciation to improve trade balances, while surplus countries need to boost domestic demand, especially consumption.

But this adjustment of relative prices via currency movements is stalled, because surplus countries are resisting exchange-rate appreciation in favor of imposing recessionary deflation on deficit countries. The ensuing currency battles are being fought on several fronts: foreign-exchange intervention, quantitative easing, and capital controls on inflows. And, with global growth weakening further in 2012, those battles could escalate into trade wars.

Finally, policymakers are running out of options. Currency devaluation is a zero-sum game, because not all countries can depreciate and improve net exports at the same time. Monetary policy will be eased as inflation becomes a non-issue in advanced economies (and a lesser issue in emerging markets). But monetary policy is increasingly ineffective in advanced economies, where the problems stem from insolvency – and thus creditworthiness – rather than liquidity.

Meanwhile, fiscal policy is constrained by the rise of deficits and debts, bond vigilantes, and new fiscal rules in Europe. Backstopping and bailing out financial institutions is politically unpopular, while near-insolvent governments don’t have the money to do so. And, politically, the promise of the G-20 has given way to the reality of the G-0: weak governments find it increasingly difficult to implement international policy coordination, as the worldviews, goals, and interests of advanced economies and emerging markets come into conflict.

As a result, dealing with stock imbalances – the large debts of households, financial institutions, and governments – by papering over solvency problems with financing and liquidity may eventually give way to painful and possibly disorderly restructurings. Likewise, addressing weak competitiveness and current-account imbalances requires currency adjustments that may eventually lead some members to exit the Eurozone.

Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition. But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, “Fasten your seatbelts, it will be a year full of potholes!"
 

By Fernando Álvarez: Ex IMF Economist

Dr. Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF. He states that: I am often asked if the recent global financial crisis marks the beginning of the end of modern capitalism. It is a curious question, because it seems to presume that there is a viable replacement waiting in the wings. The truth of the matter is that, for now at least, the only serious alternatives to today’s dominant Anglo-American paradigm are other forms of capitalism.

Continental European capitalism, which combines generous health and social benefits with reasonable working hours, long vacation periods, early retirement, and relatively equal income distributions, would seem to have everything to recommend it – except sustainability. China’s  Darwinian capitalism, with its fierce competition among export firms, a weak social-safety net, and widespread government intervention, is widely touted as the inevitable heir to Western capitalism, if only because of China’s huge size and consistent outsize growth rate. Yet China’s economic system is continually evolving. Indeed, it is far from clear how far China’s political, economic, and financial structures will continue to transform themselves, and whether China will eventually morph into capitalism’s new exemplar. In any case, China is still encumbered by the usual social, economic, and financial vulnerabilities of a rapidly growing lower-income country.

Perhaps the real point is that, in the broad sweep of history, all current forms of capitalism are ultimately transitional. Modern-day capitalism has had an extraordinary run since the start of the Industrial Revolution two centuries ago, lifting billions of ordinary people out of abject poverty.  Marxism and heavy-handed socialism have disastrous records by comparison. But, as industrialization and technological progress spread to Asia (and now to Africa), someday the struggle for subsistence will no longer be a primary imperative, and contemporary capitalism’s numerous flaws may loom larger.

First, even the leading capitalist economies have failed to price public goods such as clean air and water effectively. The failure of efforts to conclude a new global climate-change agreement is symptomatic of the paralysis.

Second, along with great wealth, capitalism has produced extraordinary levels of inequality. The growing gap is partly a simple byproduct of innovation and entrepreneurship. People do not complain about Steve Jobs’s success; his contributions are obvious. But this is not always the case: great wealth enables groups and individuals to buy political power and influence, which in turn helps to generate even more wealth. Only a few countries – Sweden, for example – have been able to curtail this vicious circle without causing growth to collapse.

A third problem is the provision and distribution of medical care, a market that fails to satisfy several of the basic requirements necessary for the price mechanism to produce economic efficiency, beginning with the difficulty that consumers have in assessing the quality of their treatment. The problem will only get worse: health-care costs as a proportion of income are sure to rise as societies get richer and older, possibly exceeding 30% of GDP within a few decades. In health care, perhaps more than in any other market, many countries are struggling with the moral dilemma of how to maintain incentives to produce and consume efficiently without producing unacceptably large disparities in access to care. It is ironic that modern capitalist societies engage in public campaigns to urge individuals to be more attentive to their health, while fostering an economic ecosystem that seduces many consumers into an extremely unhealthy diet. According to the United States Centers for Disease Control, 34% of Americans are obese. Clearly, conventionally measured economic growth – which implies higher consumption – cannot be an end in itself.

Fourth, today’s capitalist systems vastly undervalue the welfare of unborn generations. For most of the era since the Industrial Revolution, this has not mattered, as the continuing boon of technological advance has trumped short-sighted policies. By and large, each generation has found itself significantly better off than the last. But, with the world’s population surging above seven billion, and harbingers of resource constraints becoming ever more apparent, there is no guarantee that this trajectory can be maintained.

Financial crises are of course a fifth problem, perhaps the one that has provoked the most soul-searching of late. In the world of finance, continual technological innovation has not conspicuously reduced risks, and might well have magnified them.

In principle, none of capitalism’s problems is insurmountable, and economists have offered a variety of market-based solutions. A high global price for carbon would induce firms and individuals to internalize the cost of their polluting activities. Tax systems can be designed to provide a greater measure of redistribution of income without necessarily involving crippling distortions, by minimizing non-transparent tax expenditures and keeping marginal rates low.  Effective pricing of health care, including the pricing of waiting times, could encourage a better balance between equality and efficiency. Financial systems could be better regulated, with stricter attention to excessive accumulations of debt.

Will capitalism be a victim of its own success in producing massive wealth? For now, as fashionable as the topic of capitalism’s demise might be, the possibility seems remote. Nevertheless, as pollution, financial instability, health problems, and inequality continue to grow, and as political systems remain paralyzed, capitalism’s future might not seem so secure in a few decades as it seems now.

By Fernando Álvarez: Ex IMF Economist

Dr. Michael Spence, a Nobel laureate in economics, is Professor of Economics at New York University’s Stern School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, and Senior Fellow at the Hoover Institution, Stanford University. He holds the view that if one looks at the trade patterns of the global economy’s two biggest players, two facts leap out. One is that, while the United States runs a trade deficit with almost everyone, including Canada, Mexico, China, Germany, France, Japan, South Korea, and Taiwan, not to mention the oil-exporting countries, the largest deficit is with China. If trade data were re-calculated to reflect the country of origin of various components of value-added, the general picture would not change, but the relative magnitudes would: higher US deficits with Germany, South Korea, Taiwan, and Japan, and a dramatically lower deficit with China.

The second fact is that Japan, South Korea, and Taiwan – all relatively high-income economies – have a large trade surplus with China. Germany has relatively balanced trade with China, even recording a modest bilateral surplus in the post-crisis period. The US has a persistent overall trade deficit that fluctuates in the range of 3-6% of GDP. But, while the total reflects bilateral deficits with just about everyone, the US Congress is obsessed with China, and appears convinced that the primary cause of the problem lies in Chinese manipulation of the renminbi’s exchange rate.

One problem with this view is that it cannot account for the stark differences between the US and Japan, Germany, and South Korea. Moreover, the real (inflation-adjusted) value of the renminbi is now rising quickly, owing to inflation differentials and Chinese wage growth, particularly in the country’s export sectors. That will shift the Chinese economy’s structure and trade patterns quite dramatically over time. The final-assembly links of global-value added chains will leave China for countries at earlier stages of economic development, such as Bangladesh, where incomes are lower (though without producing much change in the balance with the US).

A somewhat more sensible concern might be that the dollar’s reserve-currency status causes it to be “over-valued” with respect to every currency, not just the renminbi. That could create additional pressure on the tradable part of the US economy, and thus might help to explain why the US tradable sector has not generated net employment for two decades. But, in order to explain performance relative to Japan and Germany, one would have to argue that the euro and the yen have been undervalued, which makes no sense. In fact, the employment generated by the tradable sector has been in services at the upper end of the distributions of value-added per person, education, and income. As a result, growth and employment in the tradable sector have gone separate ways, with healthy growth and stagnant employment. In Germany, by contrast, the tradable sector is an employment engine. The same is true of Japan.

The US economy’s distinctive features for at least a decade prior to the crisis that began in 2008 were an unsustainably high level of consumption, owing to an illusory wealth effect, under-investment (including in the public sector), and savings that fell short of the investment deficiency. That excess household and government consumption fueled the domestic economy – and much of the global economy as well. In several European countries that now confront fiscal and growth challenges, the pattern was somewhat different: most of the excess consumption and employment was on the government side. But the effect was similar: an unsustainable pattern of income and employment generation, and lower productivity and competitiveness in these economies’ tradable sectors, leading to trade deficits, stunted GDP, and weak job creation.

One could argue that the euro has been and still is overvalued, and that this has hindered many eurozone economies’ productivity relative to non-eurozone countries. But the relative productivity deficiencies within the eurozone are more important for growth, and have nothing to do with the exchange rate.

The focus on currencies as a cause of the West’s economic woes, while not entirely misplaced, has been excessive. Developing countries have learned over time that real income growth and employment expansion are driven by productivity gains, not exchange-rate movements. This, in turn, requires public and private investment in tangible assets, physical and telecommunications infrastructure, human capital and skills, and the knowledge and technology base of the economy.

Of course, it is possible for a country’s terms of trade to get out of line with income and productivity levels, requiring a rebalancing. But resetting the terms of trade is no substitute for tackling the structural underpinnings of productivity. None of this is peculiar to developing countries. Underinvestment has long-term costs and consequences everywhere. Excess consumption merely hides these costs temporarily. In the US, productivity deficiencies have led to a pattern of disconnection from global supply chains. So the challenge for America is not only to restore productivity, but also to restore its links to the main currents of world trade.

China’s growth – and, more generally, that of the major emerging economies – provides a substantial potential tailwind. That is certainly true nowadays for Germany, Japan, and South Korea. The US and others can take advantage of it as well, but only if productivity relative to income levels in specific areas of potential competitiveness begin to rise. 

As long as America economic policy remains focused primarily on deficits, domestic demand, exchange rates, and backsliding on trade openness, its investment deficiencies will remain unaddressed. That means that its employment and income-distribution problems will remain unaddressed as well.

The good news is that, at a deep level, incentives across advanced and developing countries are aligned. The emerging economies would like nothing more than the restoration of sustainable patterns of growth in the advanced economies, and are prepared to be cooperative players in that process. But focusing on these countries’ exchange rates is not the right way to go about it.