Soaring US budget surplus

Chris Burford cburford at gn.apc.org
Wed Jun 28 16:34:55 PDT 2000


At 14:28 28/06/00 -0400, you wrote:
>Chris Burford wrote:
>
>>I gather that the trend for the US government to run a budget surplus is
>>so strong that it may be possible to pay off the national debt by 2012.
>>
>>I understand the USA is still running a substantial trade deficit.
>>
>>Could someone spell out if there is any relation at all between a budget
>>surplus in the accounts of a national government and, on the other hand,
>>a trade deficit.
>
>Evidently there isn't.
>
>Doug

I thought there probably was. If you push me, I suspect there is some explanation for why economic sin reaps such valuable rewards - so long as you are the hegemonic country.

Whereas most countries cannot afford to run too large a trade deficit without having to push up interest rates to keep enough money within their country, and to deflate their economy to reduce imports, the hegemonic country which prints world money, can run a larger trade deficit before it has to raise interest rates. This is because other countries have to hold its money for purposes of liquidity in global trading.

This amounts to a free gift of the order of, what? several tens of billions of dollars from the rest of the world to the USA each year. This is an import of free crystalised labour in the form of the commodities which are backed only by dollars circulating as world money.

This extra margin of latitude can allow capital to go on expanding within the US before it reaches the limit of its limit cycle, and government revenues are more buoyant when the business cycle is working at maximum capacity.

Could someone provide an alternative model?

Chris Burford

London



More information about the lbo-talk mailing list