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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: elmatador who wrote (52218)8/11/2004 4:21:26 AM
From: Taikun   of 74559
 
<Fiscal policy is not in a robust condition to offer help. The Federal Budget is on course to be in deficit this year by $478bn - or 4.2 per cent of gross domestic product >

I read that about $200bn of the $478 is from the tax cuts for the rich. I suppose, if correct, that is about 2% of GDP.

If those rich people spend there money in the US, that would be one thing, but imagine if the smart money is going out of the US.

In fact, that is what is going on. The US has a current account deficit, but what is less discussed is the capital account surplus. Americas invest more outside the US-for higher returns-than is invested by foreigners in the US. The returns are higher outside the US.

So, actually, instead of being a domestic stimulus. tax cuts for the rich depreciate the USD and take liquidity out of the US economy. The again, middle class tax cuts would just be spent at Wal-Mart which does all its buying outside the US as well.

It just looks like one huge short position on the US economy.
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