The United States Economic versus the World

Productivity growth is not the same as GDP growth. Have you read that the European and American treasury officials have been telling the Chinese they need to raise interest rates? It's because they're keeping the currency artificially low--the Chinese economy is booming, which means their currency should be rapidly accelerating. But it isn't, because the Chinese central bank is keeping interest rates artificially low. That will lead, sooner rather than later, to skyrocketing inflation, and the boom will end. So why should the Americans and Euros give a damn? Because of all their capital investments in China, which will collapse in value, and because of the destabilization in the world economy as China would then attempt to export their inflation through higher finished goods prices.

Relative economic growth is what matters. And the US is gaining again, which is why the dollar is strengthening. The ECB is looking to raise rates, which is the opposite of what they need, and will result in a collapse of economic growth in Germany and France, which are the only EU countries that really matter anymore.No, long term every account will be in balance. When America runs a trade deficit, it's because more foreigners are investing in the United States than we do abroad. That means that America has to spend the excess capital on foreign goods and services. The trade account has been in deficit since 1980 in every quarter except for one, therefore the capital account has been in surplus in every quarter, except for the same one exception.

The only concern vis a vis the deficits are, what is the money being spent on? If it's for discretionary spending, then that is problem, like putting your grocery bill and vacations on credit cards you only make the minimum payment on. But what if the spending is on legitimate, long-term assets? Like bridges and highways and colleges and airports and dams and aircraft carriers?--then it's fine. You want to match long-term assets to long-term debts, and that's why the credit markets exist in the first place. The US government has at least $12 trillion in long-term assets, against only $9 trillion in debt. The spending still drives me crazy, but were the US government a household, it would have the highest credit score in the world.

Rony Delgarde