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To: re3 who wrote (157393)	5/21/2003 3:31:37 PM
From: GST	Respond to of 164684

The US current account deficit has been slowly percolating in the background for years without harming the US economy. Many people, myself included, have been of the opinion that it is merely a matter of time before the current account deficit becomes unsustainable. We fund our twin deficits -- current account and government budget -- with money borrowed from China, Japan and Europe. We borrow a billion dollars a day from overseas, and this number has been rising sharply as we borrow to fund the war in Iraq and to offset declining tax revenues. All the debt we have amassed must be serviced by interest payments. The problem we face is one of continuing to attract these huge inflows. Without them, we have a currency problem. It appears that we might finally be at the point where we can no longer finance our deficits. Our deficits drive domestic spending. Our domestic spending has been an important drive for China. If you ask what is the impact for China, the impact is negative unless the Chinese devalue against the dollar. If this happens, we have a new international currency crisis. The world economy is not in good shape. And the current economic "team" at the White House is second only to the National defense team in screwing things up.