Australia is bubblicious. Add to this it survives by supplying stuff to China. That puts it out of the North American trading block which is all that Trump cares about. As Trump seeks the decline of China, Australia will decline some too. Lots of allies will decline. And eventually the USA will cannibalize itself.

As long as you have affordable energy that is true. The Bannon/Trump theory is that there is finite energy and we must guard it. They want to guard it by a fascistic separation of cultures. Push the Muslims over there. Push the Chinese over there. Isolate the them. I am wondering when they will add blacks and Jews and Hispanics, and isolate them as well. This is not the America I am familiar with and I hope it goes away soon.

I appreciate your wise comments, Trader and Norman. It just smells like war fever. It was established before Trump, but the hope of world cooperation is being destroyed by an arrogant nation with less than 5 percent of the population. I grew up with Ike and JFK. Even Reagan had a hope for world peace. We have never been more arrogant and dangerous as a nation as we are now. Hillary would have pushed this arrogance in another direction perhaps. But we are not acting in our own self interest, imo. We are not striving for a Westphalia peace. We are striving for world domination and fascism.

Keeping cash as an option because you cannot rely solely on technology. Cash is absolutely necessary to every day society. Travelers need cash. People who fear banking stability need cash. Poor people need cash. People who fear technological meltdowns need cash. People who fear government spying need cash. Government will just have to estimate the cash GDP in society.

Getting rid of cash in order to inflate GDP is, as analysed by the author, a really bad idea.

Hoover Dam was an example of government spending that ultimately created a city, Las Vegas, with over 2 million people in the metro area. I don't think you can eliminate government spending from GDP measurements. And the lag time between government spending and the fruit of that spending is never considered.

It remains to be seen if Trumponomics breaks the new normal, and if that causes severe problems in the future.

An indefinite business cycle as collateral becomes less valuable day by day. Interesting scenario.

I agree pretty much with your assessment of #Trump. The caveat to this deal is if Canada gets flack from the US for making a free trade deal with China. Trump thinks he has corralled Canada, but the Canadians don't believe that is the case!

I want to make one correction, Moon. It should read: "Then in a downturn, with the r* too low, it becomes more difficult to use lower interest rates to boost the economy as we approach the zero lower bound."

Unfortunately I wrote high instead of low. Hopefully the context did not confuse too many readers. Raising rates causes the R* to drop. That can cause a problem if the recession comes as rates are being raised and the R* is too low.

Interesting article. Capital flight had a housing bubble and liar loans before. That won't be available unless some major changes are made. So far, there is some repeal of mortgage and financial regulation. But liar loans are not yet permitted. If they will be, the hot money will be the fuel. Buyer beware!