Oct 5, 2010

The structural problem with U.S. economy

The key problem is the improved producivity in India and China. Under the current foreign exchange framework (which is global in scope) and the monetary and fiscal regime (that are local in each bloc), there inevitably will be an imbalance when productivity level are getting closer. Basically, the majority of the U.S. and EU labor force will be “priced” out by Indian, Brazillian and Chinese counterparts. The solution is not fiscal stimulus but looser immigration control, which allows the inflow of higher caliber population to move into the U.S. in order to sustain the productivity advantage and at the same time, smaller government and less fiscal intervention. Elimination of minimum wage and union monopoly on wage would also help.

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