Read the whole thing, Part II
Following up on the theme of manufacturing decline, here’s a piece by Ronald McKinnon of Stanford, linking the decline of US manufacturing to the low rate of national savings. I’m not entirely convinced by the argument, which seems to rest heavily on the manipulation of identities that gave rise to the twin deficits hypothesis, but I’ll think about it a bit more.
It is certainly striking that all the English-speaking countries seem to have a broadly similar pattern of large current account deficits, low household saving, and rapid decline in the manufacturing sector (more I think than can be accounted for by long-run structural change). This would be an obvious basis for contagion in the event of a financial crisis affecting the US.