Ike,..Re:<<new configuration of increasing current account deficit on one hand, yawning trade gap that is falling exports and stagnant imports>>
This is not a simple subject and I don't know exactly how to respond, never mind that an understanding of thermodynamics doesn't qualify one to address complicated economic interactions.<g> I did go back and look at some articles by Stephen Roach, the economist at Morgan Stanley to get some numbers.
- US balance-of-payment gap is currently 2% of GDP and expected to rise toward 3%; however, at that time, GDP was expected to be in the 3% annual range or less. The economy has surpassed all expectations here and the last revision came in at 4.8% for Q1. As long as the economy maintains this kind of growth, the ratio between output gap and GDP can remain in the 2% area.
- Trade gap showed a 9+% increase to 14+ billion in most recently reported number. This also adds to the current account deficit. I don't have the exact composition of exports and imports but non-Japan Asia accounts for only 7% of Global trade and the US part of that number is small. So to see these facts in proportion, I have to dig up the absolute numbers.
- Expected budgetary surplus will help to offset the rising current account deficit.
If the US economy, corporate earnings, can continue to grow at or near recent levels, and if the dollar remains strong, and if inflation remains at current levels, then it would appear this equilibrium (maybe shaky) could continue. But there are a lot of 'ifs'. <g>
Regards,
Lee |
