[Neanderthal]

This is from the serious folks at the NBER, not the chicken little yahoos that we are all familiar with on the web. If one believes what these NBER guys are saying (that it is very likely that the dollar will be worth a lot less in the future than it is now and that times may get very tough over the next several years), what would be a good place to park one's money now?

[BlackVeil]

I just added "deficit" and "debt" to the keywords. I felt like adding "dreadful" as well, because this topic really is dreadful, what it means for the future ...

[GSlob]

That would be a gold bug song. Foreign holders have their own structural problems which will not be sorted out any time soon [China with its money-losing state enterprises and epidemic corruption; Japan with its asset bubble and the pension costs; Europeans with the costs of their welfarism]. This is what prolongs the current structure. His scenario is predicated on the major foreign holders successfully overcoming their domestic problems first.

[elmer fudd]

I tend to doubt the authors allegations. As a percentage of our GDP we ran higher deficits both during WW2 and the Reagan era.

[Lancer_N3502A]

Read later.

[staytrue]

This is serious, but not as serious as the author portrays.

Every country that ran a current account deficit like the US, has had their economy blow up in their face.

However, the US is very unlike the other blow ups in that those countries had CA deficits because no one wanted to buy their stuff. The US has a CA deficit because everyone wants to invest here.

from the article "in part, the current account predicament is a reflection of the fact that the United States sits at the center of an "international financial system where its assets have been in high demand."

What happened in other countries is their economies stalled (usually via too much govt. boondoggles and welfare spending), then they borrow money in US dollars to import goods the economy no longer produces, then the currency crashes but the foreign debt is denominated in dollars so suddenly, they owe money that can not be repaid because their money is worthless. The end result is they have no dollars, no one wants their worthless paper, they can't import which means vital goods are no longer available and that is the ugly end.

This will not happen in the US because the US is a huge economy so things will happen slower. Inject a mouse with poison and it dies, do the same with an elephant and it dies very slowly. This will allow the US time to correct the problems. Also, the US foreign debt is in dollars and not someone elses money. So if our currency crashes, we can still repay in dollars.

This will end badly for the US as the only way out of a CA deficit is to produce more and import less which is the same as working more and getting to spend less. But it will not likely be anything like what happened to other countries with a similar problem.

[Herakles]

The real problem is unfunded liabilities - I' not talking about socialist Security; I'm talking about the pensions and health care benefits for the massive government work force that is retiring.

It seems everyone's pensions are becoming a thing of the past, but the government employee's pension are backed by the full faith and borrowing ability of the Federal government.

Everyone over 65 will be bagging groceries for a living while the government scribes will be vacationing in Florida - we are truly becoming slaves to people who are putting us into massive debt; but nothing bad will ever happen to them.

Let us eat cake!

[Moonman62]

"These estimates indicate that, on average…the decline in GDP growth per capita has been in the range of 3.6 to 5 percent in the first years of adjustment. Three years after initial adjustment, GDP growth will still be below its long-term trend."

That's because the only "fix" for a current account deficit is for a government to purposely ruin its economy. Singapore was an exception in that they let matters run their own course, and they came out of it rather well.

[Moonman62]

This is from the serious folks at the NBER, not the chicken little yahoos that we are all familiar with on the web.

They are still professional economists, which means they score more points by calling attention to themselves, rather than being right.

[The Duke]

The last time we had mega-inflation (which is what we're talking about here) the happy people were the ones who had previously bought the biggest, most expensive homes (because they later paid for them with cheaper dollars).

And, so what if it means that some manufacturing moves back here? ("Br'er Fox, do with me what you will, but PLEASE don't throw me in that briar patch!")

If you're inclined to buy gold I'd say you'd do much better buying bullets.

[liliesgrandpa]

"Never in the history of modern economics has a large industrial country run persistent current account deficits of the magnitude posted by the U.S. since 2000,"

RINO Bush has been a disaster. Him and his buddies in Congress are trying to spend us into a third world country.

[AZRepublican]

I've been saying for years the govt. should just file chapter 11 and get it over with...then sue every former congressman who voted for these these unconstitutional expenditures.

[arthurus]

The so-called Current Accounts Deficit is a measurement of one side of a two-way flow of money. It is a very good positive measurement of America's economic health and a booming economy ALWAYS runs current account deficits. That means that a lot of foreign capital is coming to America to provide even more goods and jobs. It is a convenient handle for leftists to complain about the terrible-economy-heading-for-a- cliff during a Republican ocerseen boom. If everything is going right for a Republican administration the CAD will always be in "deficit" and because it sounds terrible when one does not consider the other side of it, it must be used to fan economic fear of a healthy economy.