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Japan has run persistent fiscal deficits without generating significant growth; its debt-to-GDP ratio has persistently risen.
Countries that run persistent current-account deficits eventually reach a crisis.
If they run persistent current account deficits and thus incur debts overseas, they must find a way to keep servicing those debts or lose that financial support.
Meanwhile, America continues to run persistent current account deficits with plenty of other trading partners against whose currencies the dollar floats.
It does not help in understanding the dynamics of the current account over time, especially in countries that run persistent current-account deficits or surpluses.
That is why many reformers think the international monetary system needs sanctions, imposed by the IMF or the World Trade Organisation (WTO), against countries that "manipulate" their currencies or run persistent surpluses.This is another idea with a history.
Similar(47)
A better model, I'd argue, is Japan in the 1990s, which ran persistent large budget deficits, but also had a persistently depressed economy — and saw long-term interest rates fall almost steadily.
Why, exactly, did we start running persistent deficits?
It ran persistent deficits even in good times.
That peg was at risk if a country ran persistent trade deficits, as its reserves would decline.
Even so, pessimists point out, the former export powerhouse is running persistent monthly trade deficits.The 2011 disasters intensified the pressures driving Japanese manufacturers overseas.
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