snip:
...against the background of a record-high U.S. current account deficit and a ballooning U.S. net foreign liability position, the emergence of twin fiscal and current account deficits has given rise to renewed concern. The United States is on course to increase its net external liabilities to around 40 percent of GDP within the next few years*an unprecedented level of external debt for a large industrial country (IMF, 2003b). This trend is likely to continue to put pressure on the U.S. 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. Episodes of rapid dollar adjustments failed to inflict significant damage in the past, but with U.S. net external debt at record levels, an abrupt weakening of investor sentiments vis-à-vis the dollar could possibly lead to adverse consequences both domestically and abroad.
snip.
So it could take years, or, it might not. The only quick remedy I can see if the shift in sentiment occurs before the election, is for Bush to be forced to raise taxes.
Doug: My questions are: Technically, in terms of how the markets work, can it occur suddenly, that is, feed itself in the space of a few days? Can there be a "great dumping" of U.S. Treasury bonds? My quick reviews of the financial crises of the nineties leads me to think that it can. What form would it take? What are the best leading indicators? (While I have your new book, I don't have the old one (Wall Street)...but I'm going out tomorrow to buy it!!)
-Conrad Herold
Conrad M. Herold
New College, Hofstra University
nuccmh at hofstra.edu
(516)463-6449 office
(516)463-4832 fax
>>> dhenwood at panix.com 01/06/04 6:19 PM >>>
Conrad Herold wrote:
>But why? I'm getting worried now. Is is because the expectation now is
>that the monster will raise taxes after the election?
Bush? Wall Streeters think he'll cut spending after the election.
Doug ___________________________________ http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk