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To: GST who wrote (159735)	1/4/2004 11:07:28 PM
From: Oeconomicus	Read Replies (2) \| Respond to of 164684

The inability to finance the current account deficit will show up in what people are willing to pay for the dollar. I told you already - the current account deficit is its own financing. We receive tangible goods and services and we give paper - US Dollars. Now, many of those dollars come back to us in the form of capital inflows, where businesses and the government exchange securities for dollars, but you don't want to talk about capital accounts. A drop of one-third against the Euro is huge Yes, but so what? -- and there is no end in sight. Says who? Why? If the capital account was the issue then I would discuss it with you, but it is the current account that is the issue. If government deficits create a demand for capital that must be met from abroad (which is hardly an established fact), then the capital account balance IS the issue. The budget deficit has NOTHING to do with the current account balance. And you still haven't explained why the current account is such a big issue. Why does it matter?