The Red Cape Girl
Essay by Woxman • June 30, 2011 • Essay • 547 Words (3 Pages) • 1,975 Views
Twin deficits, a growing budget deficit along with a growing current
account deficit began in 2002. In effect, the United States is borrowing
from foreigners in exchange for foreign imports. Some economists like to
present this as a fairly benign problem. For instance, Cooper (2005)
states that our deficits are just a drop in the bucket compared to the
magnitude of money in the larger world financial markets. Therefore, he
concludes that our foreign investors will continue to finance our budget
deficit indefinitely. Yet, others explain America's current-account
deficit as the inevitable consequence of a savings glut in the rest of the
world and believe that conditions in the United States don't have too much
to do with foreign lending (The Economist: Danger time for America, 2006).
However, for a number of reasons, the United States is responsible for the
twin deficits phenomenon which is a very dangerous situation with
potentially devastating consequences.
Many economists dispute the savings glut theory as the reason for the
dramatic increase in foreign lending to the U.S. and believe that the party
won't last forever. United States' policies are in large part directly
accountable for the twin deficit and the pursuit of foreign money....
Twin deficits, a growing budget deficit along with a growing current
account deficit began in 2002. In effect, the United States is borrowing
from foreigners in exchange for foreign imports. Some economists like to
present this as a fairly benign problem. For instance, Cooper (2005)
states that our deficits are just a drop in the bucket compared to the
magnitude of money in the larger world financial markets. Therefore, he
concludes that our foreign investors will continue to finance our budget
deficit indefinitely. Yet, others explain America's current-account
deficit as the inevitable consequence of a savings glut in the rest of the
world and believe that conditions in the United States don't
...
...