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To: Bill Harmond who wrote (121886)	3/27/2001 1:45:54 PM
From: GST	Read Replies (2) \| Respond to of 164684

Bill: from the article... "A nation's trade deficit is determined by the flow of investment funds into or out of the country. And those flows are determined by how much the people of a nation save and invest". The main thrust of the article you cite is to dispel simplistic interpretations of the trade deficit -- standard fare in economics. But it also lays out the basic mechanisms. The part it does not address because it is not central to the argument, is what happens when a country runs a large and chronic trade deficit over a long period of time. If you read the above quote from the article (and the same point is made several times in the article) you will see in it the nub of what I have been pointing out to you. AG and other leading economists ARE worried about running a chronic trade deficit and the implications it has for the long term value of the monetary base. The answer is not strategic trade policy -- I have not said one word to promote that. The answer is increased domestic savings in the US -- that has been my point in our discussion. We must save, and that will become the dominant issue and likely the dominant theme of AGs remaining years in power.