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Politics : American Presidential Politics and foreign affairs
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To: goldworldnet who wrote (227)12/7/2004 11:20:10 AM
From: Peter Dierks  Read Replies (2) of 71588
 
This is from John Mauldin:

"Even Greenspan and other Fed governors openly suggest the dollar and the trade deficit are too high. If the United States is borrowing to finance its trade deficit, then somebody must be lending, which means someone is saving. Everyone knows that the United States trade deficit, at 6% of GDP, takes around 83% of total world savings to finance (International Monetary Fund). The US government deficit soaks up a huge amount of our own national savings.

The reality is that the trade deficit cannot go much higher because the world is running out of the ability to lend more money. Someone somewhere must start to save more or the deficit must begin to come down. The classic ways are for the dollar to drop or for a recession to appear. What politician or Fed governor in his right mind would deliberately induce a recession? The answer that is left is for the dollar to drop, and that is clearly the way the Fed and the Treasury are leaning.

That also means the US must ultimately finance its own deficit. Thus we will be forced to save more and spend less. Given the boomer retirement coming all too rapidly down the road, it is hard to imagine a longer term scenario which yields growth in consumer spending, increased savings and a stable dollar, all at the same time."

According to Harry S. Dent, the US should be shifting into a recessionary mode due to demographic driven shifting of consumer spending behavior over the next decade. Perhaps there will be sufficient savings to fund the deficit. Perhaps we are just up the creek without a paddle.
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