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To: craig crawford who wrote (142093)	5/3/2002 1:45:38 PM
From: GST	Respond to of 164684

"why do americans not save? because americans are addicted to a flood of cheap imports. because of free trade" LOL -- ya, we don't save because of free trade -- I love it. BTW, the main thrust of Volker's article was precisely on the role of savings in the current account deficit. I do not recall him saying anything as absurd as "free trade makes us want to buy cheap imports instead of having savings".

To: craig crawford who wrote (142093)	5/3/2002 4:20:53 PM
From: GST	Read Replies (1) \| Respond to of 164684

Paul Volker: "An important part of that explanation is that foreign capital (in effect, the savings of other less affluent countries) moved strongly toward the United States, attracted by perceptions of strong growth and productivity and the powerful attraction of the booming stock market. Along with the rising Federal surplus, it was that foreign capital that in the absence of personal savings, in effect financed much of our investment. The capital inflow also tended to strengthen the dollar despite the growing trade and current account deficits. That strong dollar, combined with the ready availability of manufactured goods from countries functioning far below their economic potential, contributed importantly to containing inflationary pressures."..... "To finance both our current account deficit and our own export of capital, we must import close to $3 billion of capital every working day to balance our accounts. That is simply too large an amount to count on maintaining year after year, much less enlarging. One way - an entirely unsatisfactory way - to approach the need for adjustment would be to fall into extended recession or a prolonged period of slow growth. Given that the world economy as a whole is operating well below par, the dangers of such a development would only be amplified. Conversely I don't thing we should count on extending the experience of the 1990's. That would imply further depleting our personal savings, ever-larger external deficits and adding even more rapidly to our international indebtedness. For the time being, confidence in the prospects of the United States economy, its financial markets, and its currency has remained strong, little shaken if at all by the generally unexpected current slowing of growth. Our leadership in innovation, the sense of increasing productivity and efficient management, and the stability of our political institutions help underlie that confidence. Those are precious assets. But, in my judgment, they are no cause for complacency. The huge and growing external deficits are a real cause for concern. They are symptoms of imbalances in the national economy and the world economy that cannot be sustained."