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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (21053)	1/11/2005 2:33:13 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Debt looms as threat, Atlanta Fed chief says By MICHAEL E. KANELL The Atlanta Journal-Constitution Published on: 01/11/05 Although the U.S. economy looks good this year, the expansion will increasingly be threatened by huge debts being run up as part of the nation's buying binge, the president of the Federal Reserve Bank of Atlanta said Monday. In his annual address to the Rotary Club of Atlanta, Jack Guynn said the U.S. current account deficit — the measure of money and goods flowing in and out of the country, including the trade deficit — has virtually tripled since the early 1990s as a percentage of the economy. In addition, the U.S. government budget has gone from surplus to large deficit in the past four years. To finance deficits, the United States must borrow from overseas — which would be good for the future if the money were used to boost productivity. That has not been the case, Guynn said. "So our country is going deeper into debt to pay for consumption instead of investment, and in my view this trend is undesirable and at some point unsustainable," he said. He urged federal officials to demonstrate "a renewed commitment to reducing the federal budget deficit." Guynn did not say whether he thought the budget should be balanced by higher taxes, less spending or some mix of the two. Short-term deficits can fuel expansion, but sooner or later a growing deficit is trouble, he argued. Foreign money is increasingly wary about investing in the United States, he said. Moreover, deficits dampen growth and cut options for policy-makers, he said. "History has not been kind to countries that run excessive fiscal deficits," said Guynn. The imminent future is bright, he said. "I would say that our recent output growth has been and should remain pretty doggone good."http://www.ajc.com/business/content/business/0105/11fed.html?UrAuth=%60N%60NUObNUUbTTUWUXUTUZTZU%60UWU]U]UZU%60UbUcTYWVVZV