Posted by: Dirk | March 14, 2008

(Trade) War of the Worlds

The Economist found an empirical puzzle:

AS THE trade imbalance between the two blocks widens, the most serious trade war of all time is surely looming. America and Japan? No, their trade gap is modest compared with this. According to official statistics, the whole world is now running a massive current-account deficit. It appears that we are importing much more from Mars than we export to it.

In theory, individual countries’ current-account deficits and surpluses should cancel each other out. But because of statistical errors and omissions they never do. Figures from J.P. Morgan show that the world is expected to run an overall current-account deficit this year of $245 billion, equivalent to 3% of world exports of goods and services—and that the gap is widening. In 1997, the world had a small current-account surplus.

Finally, an opportunity for Paul Krugman to prove his Theory of Interstellar Trade. Given, of course, that trade extends to places farther out than Mars.

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