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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Gemlaoshi who wrote (26232)2/10/2005 10:07:53 PM
From: Kailash   of 110194
 
Good point -- not surprisingly, leaving out half the story makes the US look good.

The Bush administration brilliantly argues that large imports just means we're wealthy and can afford it (then why do we need to borrow?), and that our borrowing needs just means foreigners are eager to invest (then why are the main players Asian central banks?). It's the arguments of an addict.

As Roubini argues, at some point the increasing trade deficit with China will become a problem for China, as it cannot count on receiving much of value in return.

nytimes.com

The Bush administration, by contrast, views the deficit through a different lens. Treasury Secretary John W. Snow said through a spokesman that the report showed that the American economy was growing faster than the economies of other advanced industrial nations. The imbalance, he said, reflects the ability of American consumers to buy more imports.

Officials also contend that the gap has widened because foreigners are eager to invest in the United States; the extra funds flowing in are one consequence of the growing dollars flowing out to pay for imports.

"We are importing more than those other economies, because we are creating more disposable income than they are," said Rob Nichols, chief spokesman at the Treasury Department. The annual deficit with China set a record at $162 billion, becoming the largest trade imbalance ever recorded by the United States with a single country.
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