massive and growing U.S. current account deficit

Startbeitrag von swiss2005 am 23.01.2006 12:47


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NEW YORK, Jan 23 (Reuters) - The massive and growing U.S. current account deficit presents a threat to the world economy and an eventual adjustment will not necessarily be gradual, New York Federal Reserve Bank President Timothy Geithner said on Monday.
He said most analysts agree the external deficit is unsustainably large and will need to come down over time, but there is little consensus on how the adjustment process will unfold or the implications for the economy and financial markets.
"The plausible outcomes range from the gradual and benign to the more precipitous and damaging," Geithner said in prepared remarks to a conference in London on Global Financial Imbalances. "The size and duration of these imbalances, perhaps the most visible of which is the U.S. current account deficit, present challenges -- and risks -- for the world economy."
A copy of his remarks was made available in New York.
Geithner pointed out that the U.S. current account gap is nearing 7 percent of gross domestic product, a level without precedent for a major economy. He warned that the longer the deficit continues to grow, the more painful the eventual reckoning will be.
"Time does not necessarily help. The longer these gaps continue to build, the greater the ultimate adjustment required, and the greater the risks that accompany that process," Geithner said in a speech that revisited many of the concerns the central banker has raised in the past.
Geithner, who is a voting member of the Fed's policy committee, did not directly address the economy or monetary policy in his remarks. But he did note that the low level of long-term U.S. interest rates complicated the task of judging the appropriate level for U.S. monetary policy.
Dismissing an argument that the current low level of U.S. bond yields signalled pessimism over the economy, Geithner attributed the low rates to the rise in global savings and a substantial reduction in long-term inflation expectations.
Geithner noted that for now, risk premiums suggested there was little concern in financial markets about the size of the deficit.
But the size of the deficit and the "inevitability" of an eventual adjustment mean the world will be living for a considerable time with the risk of greater volatility in asset prices and periods of slower economic growth in the United States and the rest of the world.
Geithner said although other industrial countries have gone through a rebalancing of large deficits without damaging moves in interest rates or foreign exchange rates, the U.S. case seems "sufficiently different" that history may not be a good guide.
"And even in these past cases, the adjustment process did entail a slowdown in GDP growth, increasing unemployment, and a sharp fall in investment," he said.
While there are several arguments that may improve the odds of a gradual, benign adjustment process, "they do not really alter the general conclusion that these imbalances are unsustainable and that they will need to unwind at some point."

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