an undervalued currency shifts domestic demand away from imported goods to domestically-produced goods, and so increases domestic employment This isn't necessa

an undervalued currency shifts domestic demand away from imported goods to domestically-produced goods, and so increases domestic employment This isn't necessarily true. Given that labor is a scarce resource, and that a worker chooses him employment on the offered compensation, increasing demand for domestically-manufactured goods may shift employment to manufacturing, and away from pursuits that may be more productive in the big picture (by way of the law of Comparative Advantage). To answer the question posed by the article, here's a way to raise the US savings rate: don't penalize savings (i.e., investment) so heavily. The scheduled increase in the tax rate for capital gains, and the double-taxation on dividends (viz the tax on corporate earnings, which also happens to be one of the highest in the world) make the potential gains from savings lower. If the incentive to save is lower, then less will be saved. Hence, if you want to increase savings, then you must decrease the penalty. The OP acknowledges this: like it or not, if you want Americans to save more you must agree that either it must make production relatively easier, or consumption relatively more difficult, or both. A greater incentive to invest is the same thing as saying "make production easier". Investments will wind up going toward a better answer than something else -- else why would anyone want to do it. It'll pay for a new, more efficient factory, or a new business that builds a better product, etc. In essence, the OP is arguing to hobble production as a way to let savings catch up. It seems to me that allowing production to improve through more investing would be the better approach. I'm always wary of policies being built on the basis of arguments from Krugman. He's a brilliant economist, but he's parlaying on top of that to make arguments for specific policies, and he's really bad at that part. Economics is value neutral, and doesn't tell us directly what we ought to do in the world; it just illuminates the choices. Krugman blurs this line, pretending that economics actually does lead to policy. And he's even willing to compromise his economics to make an argument -- see http://online.wsj.com/article/SB10001424052748703915204575103720332317434.html http://online.wsj.com/article/SB1000142405274870391520457510...