(An excerpt from The
New York Times, Jan 8, 2004)
Jan. 7 With its rising budget deficit and ballooning trade imbalance,
the United States is running up a foreign debt of such record-breaking
proportions that it threatens the financial stability of the global
economy, according to a report released Wednesday by the International
by a team of I.M.F. economists, the report sounded a loud alarm about the
shaky fiscal foundation of the United States, questioning the wisdom of
the Bush administration's tax cuts and warning that large budget deficits
pose "significant risks" not just for the United States but for
the rest of the world.
report warns that the United States' net financial obligations to the rest
of the world could be equal to 40 percent of its total economy within a
few years "an unprecedented level of external debt for a large
industrial country," according to the fund, that could play havoc
with the value of the dollar and international exchange rates.
danger, according to the report, is that the United States' voracious
appetite for borrowing could push up global interest rates and thus slow
global investment and economic growth.
borrowing costs abroad would mean that the adverse effects of U.S. fiscal
deficits would spill over into global investment and output," the
House officials dismissed the report as alarmist, saying that President
Bush has already vowed to reduce the budget deficit by half over the next
five years. The deficit reached $374 billion last year, a record in dollar
terms but not as a share of the total economy, and it is expected to
exceed $400 billion this year.
many international economists said they were pleased that the report
raised the issue.
I.M.F. is right," said C. Fred Bergsten, director of the Institute
for International Economics in Washington. "If those twin deficits
of the federal budget and the trade deficit continue to grow you
are increasing the risk of a day of reckoning when things can get pretty
officials have made it clear they are not alarmed about the United States'
burgeoning external debt or the declining value of the dollar, which has
lost more than one-quarter of its value against the euro in the last 18
months and which hit new lows earlier this week.
read the rest of the Times story, click
a Trill Here, a Trill There,
an Annex Bulletin (March 1999)