The Increase of the United States Budget Deficit

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Revision as of 20:24, 13 September 2005 by Jsweeney (talk | contribs) (→‎Enablers:)
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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

Paradigms:


Experts:

  • Nouriel Roubini
  • Brad Setser

Timing:

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