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Dan Browne's avatar

OK fair point. There is no "problem". Friedman *did*, however, say that with freely floating exchange rates the balance of payments would always be equal. And they aren't.

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Don Geddis's avatar

Dan, this is getting far, far off topic. But the short answer is that there is no balance of payments "problem". E.g. http://www.themoneyillusion..., and from http://www.themoneyillusion... let me quote Sumner: "Australia’s been running big current account deficits for decades, and they can continue doing so for many centuries to come. ... Australia gets some cars and TVs built with Chinese labor, and China gets some retirement condos on the Gold Coast built with Australian labor. Believe it or not economists call that sort of mutually beneficial business deal a “deficit.” ... Don’t be fooled by words, focus on reality."

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