Thursday, March 30, 2017

Staying Rich without Manufacturing will be Hard

This title was written by Noah Smith in a recent Bloomberg column. He makes a lot good points which readers of this blog, focused on manufacturing, are already familiar. Manufacturing output isn't really booming. I would stress that, despite that trade is a big reason for why manufacturing isn't so healthy, the number one thing the government could do to promote manufacturing is adopt looser monetary policy. This would help via growing the economy (manufacturing production and employment is strongly pro-cyclical), and also help by weakening the dollar. That's a way better way of improving the trade balance than via bilateral trade negotiations or protectionism.

In any case, it's worth a read.


  1. But the Market is waiting a number of rate increases:)
    Not loosening, but tightening)

  2. Yep. The Fed is doing the opposite of what I would recommend.

  3. Only one problem: firms would rather spend cash on share buybacks than on investing in actual physical plant.


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