I hope this leads tp economic meltdown and civil war in America. *****
America.
November 26, 2005
Of Dollars, Deficits and Destiny
The United States' gap in trade and other international transactions is
on track to reach an unprecedented $788 billion in 2005. The federal
budget deficit, meanwhile, remains intractable. Normally, that would
make investors wary of holding dollars. But the dollar, which had been
in a long swoon, has unexpectedly recovered in the second half of this
year.
That is good news for the "deficits don't matter" crowd in the White
House and Congress. For them, the stronger dollar is evidence, of
sorts, that the country can run outsize deficits without suffering
their worst effects, namely, sharply higher interest rates, unrelenting
downward pressure on its currency and a drop in living standards.
But the dollar's upswing will not last forever. This year, the dollar
has been juiced partly by American companies' repatriation of hundreds
of billions of dollars from abroad. That will end soon because the
money has flowed home to qualify for a one-time tax discount, valid
only in 2005.
More significantly, the dollar has been buoyed recently by a surge of
foreign investment in the United States. Lured by interest rates that
are higher than elsewhere in the developed world, foreign investors -
mainly Asian central banks and offshore hedge funds - have snapped up
more than enough Treasury notes and other American assets to finance
our widening deficits.
Inevitably, the United States will lose its interest rate advantage.
The European Central Bank is about to raise rates, while Japanese rates
have nowhere to go but up. When other countries can compete more
effectively for foreign financing, the United States will still need to
finance its deficits, thus provoking the ill effects it has avoided so
far.
It is obvious that the administration and Congress should be taking
advantage of this easy- money period to rein in deficits. Waiting to do
so will make dealing with them much more painful. And yet, the
Republican leadership in both the House and Senate have pledged to pass
more unpaid-for tax cuts when they return to Washington in
mid-December. The House version of the budget would increase the
federal budget deficit by an estimated total of $7.7 billion over five
years; in the Senate version, the deficit increase would total $31.8
billion.
In their zeal to cut taxes, many lawmakers baldly assert that more tax
cuts are vital for economic growth. Tax cuts don't work that way when a
country is already running big deficits and has looming obligations.
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| User: "" |
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| Title: Re: Of Dollars, Deficits and Destiny |
01 Dec 2005 03:57:29 PM |
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" hope this leads tp economic meltdown and civil war in America. *****
America. "
Have you not heard of the deffraieur gambit? guaranteed to do what you
wish, but you will swept in the tsunami of crap as well.
LB
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| User: "Foaming at the Mouth Psychotic" |
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| Title: Re: Of Dollars, Deficits and Destiny |
02 Dec 2005 11:07:08 AM |
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wrote:
" hope this leads tp economic meltdown and civil war in America. *****
America. "
Have you not heard of the deffraieur gambit? guaranteed to do what you
wish, but you will swept in the tsunami of crap as well.
LB
But I will survive it. I heed the warnings of the proverbial Josephs.
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