Current account deficits (was The IMF and the Presidential Candidates)

[Bill Rosenberg <w.rosenberg@xxxxxxxxxxxxxxxxxxx>]

Been meaning to ask this for a while:

New Zealand has been running a current account deficit for 27 years. It is now
at about 8% of GDP. Sounds dangerous to me, but Treasury and other orthodox
economists here (following Friedman) say no need to worry with a floating
dollar.

Should we worry? Why?

Bill


Jim Devine wrote:
>
> Brad describes Stanley Fischer as saying:
> >--That tax cuts would surely be accompanied by a tightening of monetary
> >policy to try to keep the real GDP growth path unchanged, that such a
> >shift in the policy mix would raise the value of the dollar and increase
> >the U.S. current account deficit.
>
> >--That no one looking back at the financial crises that hit countries
> >running large current-account deficits in the 1990s and looking at today's
> >value U.S. current account deficit could remain calm at the prospect of
> >policies designed to widen the U.S. current account deficit further.
>
> If he's so concerned about the US balance of trade deficit, why isn't he
> denouncing the Fed's repeated interest-rate hikes that have encouraged the
> dollar to soar, crowding out US exports? Why is he simply blaming the
> government? Doesn't he realize that the government has a budget surplus?
>
> >--That the combination in the U.S. of an extremely low private savings
> >rate and what looks like a relatively high marginal social product of
> >investment seemed to make the argument for budget surpluses much stronger
> >than usual.
>
> Where does he get the view that investment has a high social product? is
> this simply an assumption? or is it the application of Keynesian economics,
> a reference to the multiplier effects of investment? does government
> investment in education, science, infrastructure, and/or public health have
> a similar effect or does Fischer privilege the private sector as the font
> of all that is good? if so, what  evidence does he have for this assertion?
>
> >--That everyone should listen very closely to the criticisms of the
> >current globalization process offered by Ugandan President Musaveni, one
> >of the true heroes of the 1990s and a man who deserves as much credit as
> >one individual can take for halting Uganda's downward spiral.
>
> what does Musaveni say?
>
> Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

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