The Increase of the United States Budget Deficit

Description:

The FY 2004 U.S. fiscal deficit has grown to $670 Billion. This marks the third yearly increase of the deficit. The deficit, combined with other economical events, could act as a driver to cause a hard landing of the U.S. economy.

Enablers:

• Low savings rate
  
• High spending - Foreign policy, war
  
• Tax Cuts
  
• Low interest rate lending from foreign Central Banks - Bretton Woods 2 System
  
• Growth of Chinese Economy
  
• Increase in U.S. domestic demand
  

Inhibitors:

• Scale of foreign financing required exceeds foreign central bank's willingness to lend
  
• Asian banks share more of the financing burden
  
• Inflation in China weakens financial power
  
• U.S. changes policy to reduce deficit
  

Experts:

• Nouriel Roubini
  
• Brad Setser

Timing:

Sytem will not hold at current rate in the next five years.