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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: JDN who wrote (661692)	11/19/2004 3:37:09 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

Or... you could cut wasteful Big Government spending, and the inexorable growth in the size and intrusiveness of the government.

To: JDN who wrote (661692)	11/19/2004 3:49:01 PM
From: DuckTapeSunroof	Read Replies (1) \| Respond to of 769670

Greenspan hints at "INDUCING RECESSION" unless Deficits are Cut or Returned to Surplus: Greenspan: Appetite for Dollar to Dwindle news.yahoo.com FRANKFURT (Reuters) - Insatiable foreign demand for dollar holdings will eventually fall and help reduce the massive shortfall in the U.S. current account as investors diversify, U.S. Federal Reserve Chairman Alan Greenspan said on Friday in remarks that landed hard on the dollar. Greenspan told a banking conference the United States should help correct trade imbalances by cutting its record budget deficit or face painful consequences. "Current account deficits, even large ones, have been defused without significant consequences, (but) we cannot become complacent," the Fed chairman warned. He was speaking ahead of weekend meetings in Berlin of the Group of 20 wealthy and developing economies, which comes amid a tumble in the dollar that has strained economic relations between the United States and Europe. Greenspan said cutting the U.S. budget gap was the best way to boost domestic saving and lessen America's reliance on foreigners to fund the huge shortfall in the current account. "U.S. policy initiatives can reinforce other factors in the global economy and marketplace that foster external adjustment," the influential Fed chief said, echoing growing calls from other Fed officials, European policy-makers and the International Monetary Fund for Washington to tighten its fiscal belt. "Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term proposals," he said. The current account gap has ballooned to more than 5 percent of gross domestic product, around a record $600 billion a year. The Fed chief said an eventual desire by foreign investors to cut the risk of holding too many dollars may lead them away from U.S. assets, unless offered higher rates of return that would make the shortfall "increasingly less tenable." "We see only limited indications that the large U.S. current account deficit is meeting financing resistance," Greenspan said. "Yet, net claims against residents of the United States cannot continue to increase forever in international portfolios at their recent pace." "It seems persuasive that, given the size of the U.S. current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan said. The dollar hit a new four-year low against the Japanese yen and fell against the euro, pushing the European currency back toward recent record highs, as traders saw these remarks as suggesting Fed acquiescence in the greenback's recent decline. WATERSHED "It's a hell of a speech," said Jason Bonanca, director of foreign exchange research at CSFB in New York. "It's remarkable ... I think what he's calling for here is a weaker dollar, even though he's tightening," he said, referring to the four interest-rate hikes the Fed has implemented so far this year. "I think this is a watershed," he said. U.S. Treasury Secretary John Snow made clear earlier this week the United States would look coolly on any market interventions that sought to stem the greenback's drop. "I think the history of efforts to impose non-market valuations of currencies is at best non-rewarding and checkered," Snow said in London on Wednesday. Greenspan, on a panel with European Central Bank President Jean-Claude Trichet and Bank of Japan Deputy Governor Kazumasa Iwata, said if cutting the U.S. budget gap did not do enough to narrow the U.S. trade gap, the U.S. economy was flexible enough that "market forces" could do the rest without a crisis. As he has in the past, Greenspan said greater global flexibility could make future current account adjustments less stressful and said both the United States and Europe needed to do more to make their economies more resilient. ------------------------------------------ "Reducing the federal budget deficit (or preferably moving it to surplus) appears to be the most effective action that could be taken to augment domestic saving," he said. "Corporate saving in the United States has risen to its highest rate in decades and is unlikely to increase materially. Alternative approaches to reducing our current account imbalance by reducing domestic investment or inducing recession to suppress consumption obviously are not constructive long-term solutions." money.cnn.com