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Unformatted text preview: government savings, and revalue foreign exchange b. Graph of a perfectly free trade regime i. We have more consumers now that have the goods that they want and at a cheaper rate c. If you want long term growth in a democratic regime, you need more capital and more innovation d. If every country gets one vote, you could still get together a bunch of countries that get people to make similar changes e. Moral hazard problem o Countries are going to get money anyway o So countries keep giving money regardless of actions/behaviors If the US lets other countries collapse, then the US economy will be affected o So, the US cant commit or let others fail o This offers no incentive for the US to change their behaviors You have to take a gamble and lend it to those that can change policies and hope they sustain it o You cant lend to people who cant change policies...
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- Fall '10