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Strategies & Market Trends : China Warehouse- More Than Crockery
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To: RealMuLan who wrote (1972)12/14/2003 10:54:56 AM
From: RealMuLan  Read Replies (1) of 6370
 
Expert View: Spending all the way to the bank
Mark Tinker
14 December 2003

At the moment everybody seems to hate the dollar. Perhaps that fits in with the popular image in Europe of the United States being to blame for everything. However, the usual explanation is the current account deficit, with the over-borrowed, spend-thrift, reckless American consumers relying on the kindness of strangers (i.e. the rest of us) to support their habit.

In fact, so widespread is this current account story that it has almost become an article of faith. That, of course, doesn't mean it is right. But before going up against conventional wisdom on economic matters, it is always useful to have a quote from Alan Greenspan to support your thesis. In a speech given in Washington last month, Mr Greenspan noted that for every current account deficit there is a capital account surplus (after all, that's why it's called the balance of payments). The question, then, is what comes first? Does the US every day spend $1.5bn dollars more than it earns and thus need to rely on others to lend it the money? Or does it receive $1.5bn a day from the rest of the world and need to spend it?
news.independent.co.uk
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