"Thanks to the deficit, the buck stops here:" Stiglitz

Washington Post,Sunday, August 30, 09 published the above title by Nobel Winner in Economics, 2001, Professor Joseph E. Stiglitz of Columbia University. He is the former Chairman of the Council of Economic Advisers during the Clinton administration.

"President Obama inherited an economic mess from Bush administration, and the cleanup comes with an inevitably high price tag. We are paying it now.

In a globalized economy, the current system is not only bad for the world, it is bad for the United States,too. In effect, as other nations hold more dollar reserves, we are exporting T-bills rather than auto et al.

The United States has seen great advantages with the dollar as the world's reserve currency of choice, particularly the ability to borrow at low interst rates seemingly without limit. But we have not seen the costs as clearly: the inevitable trade deficits, the instability, the weaker global economy. The benefits to us are likely to shrink, and rapidly so, as nations shift their holdings away from the dollar.

It is happening already, and the process is likely to accelerate. Chinese authorities have openly expressed concerns about the value of the country's vast dollar reserves. Not surprisingly, China and other nations holding lots of US debt support efforts to build a new system.

America should show leadership in helping shape this news structure and managing the transition, rather than burying its head in the sand. We may have preferred to keep the old system, in which the dollar reigned supreme, but that is no longer an option."

His insightful analysis is independent and objective and I do share his judgment as I have sent my previous blogs to express the same rationale. Here we can easily detect the close relationship of Sino-American Economics. China is a friend or a partner of the United States and two nations must work together in the 21st century.

Francis Shieh a.k.a.Xie Shihao, a lifelong student of economics, witnessing the positive economic policy with knowledge and wisdom for humanity in the global context.

Sunday, August 30, 2009 at 1.36 p.m. at Bowie Library.