U.S. prospects

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Tue Sep 28 07:40:09 PDT 1999


My problem with this kind of analysis of the relation between CAD, fiscal surplus and currency value is that it is akin to the search for an inverse square law that applies universally to all countries. How that relation works out for Chile or Emerging Asia may not illuminate how it works for the US.


> by this simple national accounts
>identity, the US private sector deficit is entering new high ground.

So the US prints dollars or allows its currency to fall, and the debt is restructured. Big deal?


>Now, if the US private sector financed its savings deficit with the
>issue of equity matters might not be so grave. Private borrowers
>cannot weather having the plug pulled on them by their lenders, but
>if they "borrow" with the issue of equity, not debts, the former
>being perpetual claims that require no fixed payments, such borrowers
>can weather a considerable storm.

You can weather a storm if your debt is denominated in your currency; and the mad govt creation of money does not threaten a free fall of your currency because you are the reserve center, the lone world class mercenary in the world, control the world's biggest market, monopolist of the most advanced technological inputs, etc.


>it is also retiring equity with debt close to the
>tune of 2% of GDP a year.

Well this must be for tax purposes. Interesting that the budget surplus is then increasing at the same time! Shows that the rest of the world is financing the US budget surplus as well by the inflationary effect its inflows are having on US securities.

If this is the last ride of the US Empire, it's helluva of a ride.

Yours, Rakesh



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