Friday, November 19, 2004

Department of Duh

Greenspan Says U.S. Deficits Pose a Risk

"The persistence of bloated U.S. trade deficits over time can pose a risk to the U.S. economy, which thus far has proven resilient, Federal Reserve Chairman Alan Greenspan warned Friday. Policy-makers must not get lulled into a sense of complacency, he said.

The broadest measure of trade, called the current account deficit, swelled to an all-time high of $166.2 billion in the second quarter of this year, the most recent period for which this information is available.

`Current account imbalances, per se, need not be a problem, but cumulative deficits ... raise more complex issues,' Greenspan said in speech in Frankfurt, Germany. A copy of his remarks was distributed in Washington.

So far, foreigners are willing to lend the United States money to finance the current account imbalances, Greenspan pointed out. The worry, however, is that at some point foreigners might suddenly lose interest in holding dollar-denominated investments. That could cause foreigners to unload investments in U.S. stocks and bonds, sending their prices plunging and interest rates soaring.

President Bush says the best ways to handle the yawning trade deficits is to get other countries to remove trading barriers and open their markets to U.S. companies.


Reducing the U.S. federal budget deficit, Greenspan said, would be an important action to boost U.S. savings. Continued flexibility in the U.S. economy also has been important in the economy's ability to absorb and rebound from economic shocks, he said."

Of course, the Boy King is going to blame it on obstructive trading policies by other countries. That way, he doesn't have to confront the variables he can control, i.e., the obscene tax breaks for the wealthy and the borrow-and-spend policies that are driving up the deficit.

But no worries. If our currency goes the way of Charmin, we can just invade the EU and China. After all, we're an empire, aren't we?


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