A few people have asked me to explain more about the previous post. So, here is my thinking on this. The U.S. consumer (and government) have been running a current account deficit for a long time. However, as the the chart below shows, as a percentage of GDP (which is the important measure) the current account deficit has spiked. The current account is the overall inflows vs. outflows of wealth into our economy. The chart in the post below indicates that the U.S. has been sending significantly more money overseas. In the long run, this is bad.
However, don't get the idea that the world is more dependent on the U.S. debt-stifled consumer than ever before. I think that the world economy is relying on the U.S. economy less than ever. This is because there are vast new classes (in the hundreds of millions of people) that are just coming into the world economy. They will want to buy many things, and the U.S. will sell them.
Also, I wonder if there is an investment lag taking place, where the U.S. companies are spending vast sums to build out infrastructure (factories, etc.) that haven't yet started generating income back to the U.S. We'll see.
Even as the dollar drops in value, and even as U.S. economic growth moderates, corporations (especially ones with foreign exposure) are reporting record profits. Profits are at their highest levels ever in terms of percentage of GDP.
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2 comments:
um well I don't really get what but still hi there this is Hattie you're cousin lol!!!!!!!!!!!!!!!!!
Paul, I met the most fascinating young man from Switzerland on my trip to Mex. City a few weeks ago. We talked for the entire 5 hour flight. I learned a LOT about the Swiss political system, the Swiss church, and the Swiss way of life in general. You would have loved it. He, Urs, is running for national office in October of this year. I invited him to come visit sometime and I wouldn't be surprised if he took me up on it.
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