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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: gpowell who wrote (19552)12/26/2004 8:21:59 PM
From: Rational  Read Replies (1) of 116555
 
Will the U.S. resort to strategies comparable to what it did in 1930 to alleviate its trade and budget deficits?

Currently the U.S. is strategically striving for establishment of friendly regimes in oilfield nations to have cheap oil and to force rest of the world to trade in dollars. But this will not help reduce U.S. trade deficits because global businesses will continue to shift their operations to Asia. The U.S. state and Federal governments will not be able to close their huge growing budget deficits unless they resort to massive layoffs. These deficits are now being funded by surpluses generated outside the U.S.

Dollar may fall, but trade deficits are unlikely to shrink and budget deficits will not ever shrink unless government payrolls are drastically cut or government pays are dramatically reduced for all employees.

Market forces are unlikely to alleviate the problems U.S. is facing now.

What is the other viable option? Have the U.S. Congress decree moratorium on (or, better, void) all international debt claims. This may lead to retaliation by other countries. But, who will benefit the most from global moratorium on international debts? The U.S. The U.S. Congress that could decree to invade Iraq can do the same to nullify international debt claims on U.S. Treasury based on supreme national interest. The U.S. can do this once it has sufficient guns deployed in middle east to extract oil.
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