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Politics : Politics for Pros- moderated
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To: Ilaine who wrote (127400)7/25/2005 11:27:15 PM
From: Peter Dierks  Read Replies (2) of 794400
 
"Accounting is really one of my weakest points, unfortunately. I have a hard time grasping why what seems to be an asset is treated as a liability for accounting purposes."

As with business life in general the Current Account is about who is indebted to whom. The US has been fortunate in past martial conflicts to be generating a current account surplus. Right now what scares me most about the CA deficit is that the country that is preparing for war against us holds so much of our paper assets. China could devastate our currency and perhaps cause a run on greenbacks. If we just printed money, we would subject ourselves to massive inflation. If we wish to buy back the government bonds China holds, we have to sell them something, like assets. Unocal is an example of that.

Chinese investment in the US causes a CA inflow, which is opposite the CA outflow caused by purchasing Chinese goods. I hope this helps.

If we do not slowly get our house in order without causing panic, we are in for a rough ride.
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