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US deficit may pose 'global risk'

Boss Hog

TRIBE Member
US deficit may pose 'global risk'

The US economy has been improving
Excessive fiscal deficits in the US could hurt the long-term sustainability of the American and global economies, the International Monetary Fund warned.
Recession, tax cuts and high spending for the war on terrorism have resulted in large deficits, the IMF said.

That could place upward pressure on interest rates, and pose risks for the US economy and rest of the world.

IMF Deputy director Charles Collyns, said international investors could also lose confidence in the dollar.

That, he said, could force them to consider investing elsewhere.

'Adverse consequences'

Noting the dollar's recent slide against the euro, UK pound, and yen, the IMF said an unrestrained drop could have serious consequences at home and abroad.

The IMF report said the dollar has been affected by the mushrooming US current account and budget deficits.

"This trend (of deficits) is likely to continue to put pressure on the US dollar, particularly because the current account deficit increasingly reflects low saving rather than high investment.

"Although the dollar's adjustment could occur gradually over an extended period, the possible global risks of a disorderly exchange rate adjustment, especially to financial markets, cannot be ignored," the IMF said.

"Episodes of rapid dollar adjustments failed to inflict significant damage in the past, but with US net external debt at record levels, an abrupt weakening of investor sentiments vis-a-vis the dollar could possibly lead to adverse consequences both domestically and abroad."

It also said the deficits could deter private investment within the US, impede long-term productivity growth, and endanger the vitality of social security and Medicare programs.



Well-Known TRIBEr
If I understood this economics thing that I read recently, the American dollar has been overvalued since the late 1960s anyway. It's merely a long overdue correction that's happening.

Boss Hog

TRIBE Member
If there's any truth to the book I'm reading, the US has their backs covered. Just make everyone else more poor as their dollar goes down, via military strongarming...


TRIBE Member
I would not call the US dollar "over-valued", per se. There is a good reason why the US dollar's value is often out of step with the typical economic factors that affect exchange rates ... global investors have nowhere else to invest. Emerging markets are always risky (obviously), and nobody is ready to start inflating the Asian bubble again. Europe is perpetually dogged by government intervention and a sticky labour force.

Despite all of the doom and gloom editorials with their "adverse consquences", the American currency will remain strong simply by process of elimination.
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TRIBE Member
Originally posted by Boss Hog

I'm only a third of the way through it but find so much information I have to take it slow just to absorb it all.

I highly recommend it to anyone who wants to understand the first world's creation and exploitation of international poverty.
I just finished reading "King Leopold's Ghost"...a lot of lessons to be learned from that experience in Africa...