Yes, there is a general shortage of aggregate demand.
However, if any one nation uses a fiscal adjustment to restore demand it will be that much better off if the rest of the world does not increase its aggregate demand.
Fiscal adjustments, much like imports, provide benefits and not costs.
Any unilateral fiscal response will restore both domestic output and employment as well as increase imports from nations who continue to suffer from a lack of aggregate demand.
The idea that there is a need for international coordination is continued evidence of a lack of understanding of the world’s monetary systems.
All the best,
> On Thu, Nov 13, 2008 at 4:27 AM, Prof. P. wrote:
> Dear Warren,
> Many thanks.
> What you suggest is very true. But not just in the US. Here in the UK
> and practically everywhere else in the world this is very urgent and a bit
> overdue. Do you not agree? Would anything along these lines come out
> from the meeting of the G20 over the weekend, I wonder.
> Best wishes, Philip