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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: tradermike_1999 who wrote (7629)	8/23/2001 1:34:42 PM
From: elmatador	Respond to of 74559

Foreigners call the shots Copyright The Economist The World in 2001. In the past couple of years the American economy has increasingly relied on foreign funds to finance its investment and consumption booms. Strong corporate investment coupled with falling personal savings (which reached an all-time low of minus 0.4% in mid-2000) means that America's private-sector financial deficit has been reaching record highs. Earlier in the expansion this was largely covered by improved government finances. Gradually, however, ever more of the private-sector financial deficit is being covered by foreign capital inflows. Funding even moderate growth in demand will require considerable foreign capital. According to economists at Goldman Sachs, an investment bank, demand growth of 4% in 2001 (compared with 5.7% in 2000) would still imply a private-sector financial deficit of 7% of GDP. If foreigners do not provide this capital, the impact on growth, asset prices and the dollar could well be substantial. In a paper recently presented to the annual gathering of central bankers at Jackson Hole, Wyoming, Maurice Obstfeld, an economist at the University of California at Berkeley, and Kenneth Rogoff from Harvard University, argued that for the current account quickly to reach balance, the dollar would need to depreciate by more than 24%, perhaps even over 40% in real terms. A gradual adjustment, where the current account returned to balance over a period of three to five years, would demand a real exchange-rate adjustment of 12%. There are good reasons to expect the more gradual, and favourable, scenario. Foreigners' love affair with American assets has not been speculative, but has consisted in large part of long-term financial flows (including a lot of direct investment), based on productivity improvements that are increasingly evident. These are unlikely to dry up overnight. Nonetheless, history is full of sudden current-account reversals due to investor panic and exchange-rate crises. Remember East Asia in 1997. Much will depend on policymakers' aptitude. A loose fiscal policy - whether it comes from irresponsible tax cuts or from excessive spending - will increase the need for foreign capital to fund American demand, and could easily spook investors. Monetary policy will have to steer a careful course: keeping the lid on price pressure without precipitating a sudden slowdown. Any mis-step and the Federal Reserve could face the unenviable combination of rising inflation, falling asset prices and a falling dollar. America's economy in 2001 will need good policy and, every bit as important, another dollop of good fortune. I habe been looking for this chart for quite a while: Destination America in theworldin.com

To: tradermike_1999 who wrote (7629)	8/23/2001 3:16:20 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

TM, I couldn't see anything to be said for it, though the spelling was quite good. It was just a 19th century Marxist calling for nationalisation of production and giving to people according to their needs and taking from them according to their abilities. Mq

To: tradermike_1999 who wrote (7629)	8/24/2001 3:40:57 AM
From: que seria	Read Replies (1) \| Respond to of 74559

Very open-minded of a site called "Prudent Bear" to find a place for such an anti-capitalist screed. So much so wrong, where do you start? the long-running trend of governments to increase the fortunes of the already-affluent via tax cuts, deregulation, union-busting, etc. Could have fooled me on that trend. Only a true-believer socialist imagines that gov't increases someone's wealth by seizing less of his money in taxes. he (correctly) sees these pro-rich policies as provinding the underpinning for the historic bull-run. So why leave "the rich" with any income at all? Isn't that "pro-rich?" Let them eat capital! But Kudlow is worried; the "pro-rich Keynesianism" he advocates, a.k.a. the trickle-down theory is still now being implemented, but the market is tanking. Once again, failed gov't interference with markets will be used to prove the need for more gov't interference. That ever-widening cycle is the real "long-running trend." The inequality of wealth is still increasing, due in part to the continuing adoption of supply-side policies Yup. If gov't taxes less and people produce more as a result, incomes will rise (never by the same proportion), so inequality will increase. Socialism, thy name is Envy. . . . yet the market is tanking. Hence, now he argues for expansionary monetary policy as a further prop for the bull-market. Hayek well explained Why I am not a Conservative. Too often conservatives have given socialists their talking points against capitalism. Schizophrenic monetary policy (and indeed, fiat itself) is just another straw man for attacks upon a free market. The article is worthwhile as a reminder that we now living in the U.S. will likely never have anything closer to a free market than what we have now.