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Politics : Politics for Pros- moderated
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To: LindyBill who wrote (297581)3/22/2009 4:18:37 PM
From: rich evans1 Recommendation  Read Replies (1) of 793953
 
Lindy, you should be a Fed Governer. Here are excerpts from one of them-Furgeson- in 2005.

the current account balance is defined as the difference between a nation's saving and its investment. This definition highlights the decline in the ratio of national saving to GDP over the past ten years, even as investment rates have moved up a bit on balance, as the central cause of the widening of the U.S. current account deficit.

Finally, because any excess of national spending over income must be financed by foreigners, the current account deficit is equivalent to the net inflow of capital from abroad. This approach points to the surge of capital inflows into our economy as the key development underlying the emergence of the large external deficit.

So basically since our savings is low, and our budget deficits are high subtracting from savings and investment-- thank god for the trade deficits. The money has to come back here and increase our investment etc. But Carranza is right that this cannot be forever as eventually the foreigners who are foreced to bring their money back here end up owning a lot of the US assets or as greenspan always says ( have claims against us).

Basically if a business is labor intensive it has moved to china, mexico etc. Electronics, clothing, shoes- you name it.A HP exec once told me that the computer/eclectronics business was like trying to eat soup with a fork. Very low margins and China etc is the only alternative. But our industrial companies are still here in the US making lots of products thatw are not so labor intensive or expensive to ship. And you are right that our manufacturing ouput is at an all time high before this downturn. But with a trade deficit of 5% of GDP
and foreigners investing 5% of GDP in US per year, eventually they will own us. Oh well as you said, I don't care if the house next door is owned by someone from California or from NY.
Rich
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