U.S. prospects

Peter Kilander peterk at enteract.com
Mon Sep 27 20:13:35 PDT 1999


Off the top of my head, didn't the trade deficit peak at 3.7% of GDP in 1987? And the federal deficit was much higher then also?

So while the federal deficit has vanished, private sector debt has ballooned to 7%?


>Let us now look at the US from this perspective. The picture is not a
>pretty one. The US federal, state and local governments are
>generating a combined fiscal surplus of 1.5% of GDP or more. The US
>current account deficit is approaching 3.5% of GDP and likely rising.
>It is a national accounts identity that the savings deficits of the
>two combined private sectors - households and corporations---must
>equal the sum of these savings surpluses of the government and the
>rest of the world. It does not matter if the US household savings
>data understates household savings, as many Wall Street economists
>argue; that simply implies that the corporate savings data - retained
>profits -are overstated by a corresponding amount which, given the
>lofty valuation levels of current US stock prices, is probably for
>the worst (although these same Wall Street economists never
>acknowledge this latter point). Given the short falls in both US
>household and corporate savings, the large private sector deficit of
>the US must now be largely financed from borrowings from the rest of
>the world.



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