J.D

Would a Trade War Help Solve the Problem of Excess Capacity?

A great article. Thanks for taking a global perspective. All signs seem to be pointing to the unthinkable: that the crisis is actually worse than anticipated.

Protectionism is now a significant threat though it will take time to play out (possibly years). In response to a strong recession, trade barriers will provide a short term boost to domestic production which will (eventually) leave voters with a false sense that things are improving. Global overcapacity is equally worrying as countries will dump on international markets, which will also contribute to protectionism.

What about the prospects for deflation given over-investment in productive capacity caused by the global credit bubble?