I don't know what to make of his critique. Wages haven't kept up with productivity gains.
With regard to policymakers, pre-1980 economic policy was framed by Keynesian logic and policymakers viewed trade deficits with concern as they represented a leakage of aggregate demand (AD). After 1980, policymakers increasingly turned a blind eye to trade deficits and even started viewing them as semi-virtuous because trade helped constrain inflation.Interesting analogy here:
Second, it is theoretically incoherent. That is because the saving glut hypothesis is simply an updated global statement of 1930s classical loanable funds interest rate theory that Keynes discredited in his General Theory. Loanable funds theory claims interest rates are determined by demand and supply of real saving; trade surpluses are accounted for as real saving, and ergo they affect interest rates in an integrated global economy: hence, the claim that China’s trade surplus significantly determines US interest rates and China injured the US by distorting US interest rates.I don't know. The global savings glut theory still makes sense to me and it seems like Bernanke's savings glut theory doesn't contradict what Palle is arguing in his countertheory of neoliberal globalization.
For instance, the trade deficit holds down inflation, but wouldn't inflation be held down in any event by the Federal Reserve even if there wasn't a trade deficit? Is it just that it gives the Fed more room to maneuver?
Global Banking Glut and Loan Risk Premium by Hyun Song Shin