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Democracy & Technology Blog There’s only one closed economy

Supply-side economists for decades have said that there is only one closed economy — the global economy. Economic policy must therefore take into account global movements of goods, services, people, capital, and assets. Monetary policy, in particular, must acknowledge the dollar’s preeminent place in the world economy and the effect the intrinsic value of the dollar and its value vis-a-vis other currencies has on world trade and politics.
Finally, a top policymaker is acknowledging this key fact enunciated by Robert Mundell and the supply-siders so long ago. Last night in New York, Fed chief Ben Bernanke said that “the central bank would need to pay more attention to global financial conditions in setting interest rates, moving beyond its usual focus on domestic economic forces,” according to the New York Times. We’re not sure the rest of the speech lives up to this one big key insight, but it’s a start. More later….
-Bret Swanson

Bret Swanson

Bret Swanson is a Senior Fellow at Seattle's Discovery Institute, where he researches technology and economics and contributes to the Disco-Tech blog. He is currently writing a book on the abundance of the world economy, focusing on the Chinese boom and developing a new concept linking economics and information theory. Swanson writes frequently for the editorial page of The Wall Street Journal on topics ranging from broadband communications to monetary policy.