[lbo-talk] RE: Correction: Puzzling Comment on Current Account Deficit

John K. Taber jktaber at tacni.net
Mon Sep 20 07:31:02 PDT 2004


James clarified:


>
> 1) If foreigners stop buying US treasuries then interest
> rates will have to rise (this was a foolish omission from my
> post - and me, a banker!), which will reduce investment and
> increase the cost of consumer borrowing.
>
> 2) My discussion of piles of money moving around was a silly
> over-simplification. The point is rather about relative
> exchange rates. If the Chinese sell lots of goods to the US
> then the dollar should depreciate relative to the Renmimbi.
> China wants to avoid this to maintain competitiveness of
> exports, so buys US treasuries. This in effect subsidises US
> consumption by keeping imports cheap.

But I am grateful for your comments and corrections. Frequently there are economic articles in the paper that I simply don't grasp, a big reason for me to subscribe to lbo. I can't judge on my own if these articles are important or not, so I ask here.

Your comments helped.

John



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