Zeev,
Taking a contrarian view for arguments sake, consider the following.
As we all know, because of the Asian crisis, our trade deficit is sky rocketing. A seven year record was just broken in the release of the latest monthly trade figures. It only seems to be getting worse. Significantly weaker sales to Asia is still swelling the trade deficit, further and further.
The US net investment income (what US earns in foreign investments minus what US pays foreign investors) is dramatically in the negative territory. As we have talked about extensively on this thread, foreign investors are still pouring into our markets. The net investments for a one year period, ending the first quarter of this year, was $264 billion. Foreigners poured $643 billion into the US, while the US invested only $378 billion abroad.
In the first quarter of this year, net foreign purchases of stocks was $29.4 billion. Triple the $9.8 billion the previous fourth quarter of last year. Bond purchases from foreigners netted out to be $47.3 billion for the first quarter. And of course our equities markets surged as well as our bond markets. The trend appears to be continuing.
The current account deficit for the first quarter was $47.2 billion. The US current account deficit is the largest of the Group of Eight industrialized nations and is headed towards 3% of GDP. The norm at which currency speculators have been known to doubt a country's ability to finance it's foreign debt. As the US debt mounts, the greenback is starting to look a little shaky.
Now my questions are, "Is all of the above going to result in problems to the US economy?" And, "When the current account deficit soared in 1985, it caused a plunge in the strength of the greenback. Are we heading for the same problem?" So what say, the turnips?
Appreciate your views,
MikeM(From Florida) |
