^{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