“Markets Could Cope with Doubling of U.S. Deficit”
June 16th, 2007Just double from current levels? Why not triple or quadruple it and really get this party started?
Via: Financial Times:
Global capital markets would be able to finance a near-doubling of the US current account deficit to $1,600bn a year by 2012, a McKinsey study published on Friday argues.
The study, by McKinsey Global Institute, breaks new ground in analysing the sources of funding for the deficit, and what a large dollar depreciation would mean for different industries and US trading partners.
McKinsey estimates that, based on trend growth rates and current exchange rates, the US deficit will reach $1,600bn (€1,200bn, £815bn), or 9 per cent of gross domestic product, in five years’ time, up from 6.5 per cent of GDP last year.
…
“There really is nothing imminent about the deficit ending at all,†Diana Farrell, one of the authors of the study, told the FT.
But the study assumes that foreign investors do not alter their behaviour in the light of the apparently unsustainable trajectory of the current account deficit beyond 2012 and demand greater rates of return to compensate for the risk that the dollar will depreciate.
Research Credit: PD
Oh yeah, let’s all just believe in faeries and clap our hands! {clap-clap-clap}
Of course the “markets” can tolerate it. Since the “markets” are as fictional as the “deficits,” and since the whole thing is really held together by physical and mental coercion of unparalleled proportions, what difference does it make?
The market is fictional? I’d have to disagree there. The market is the only thing that has anything close to accurate reporting of it, since the reporting of it is what drives the market. 🙂
@ Anonymous
By fictional, I mean the popular conception of the market, which encompasses the dumb money, otherwise known as 99% of the individuals who invest. What do you get from the “smart” money? A compartmentalized, insectoid priest caste that manages wealth concentrated into the hands of a wealthy plutocrat elite. Individual sects within this priest caste have different functions, some of which are necessarily at odds with each other. However, it really all boils down to clash of the titans, otherwise known as the owners.
When civilians who go to “markets,” they get to choose from what has already been pre-selected for sale, 99.9% of which is worthless, manufactured wants. If you want better stuff, it gets more expensive, and regulated, so you’d better be an institution or a corporation.
Now, as for the markets of high finance, ever notice how you never own anything more than abstraction? Whether its gold, shares of a company, or hog futures, you hold a piece of paper with some writing on it, at least theoretically you do, assuming you don’t merely have the electronic equivalent of it. This “data” can easily and conveniently be disappeared under certain political circumstances, like if your fellow bourgie-capitalists piss off the working stiff too much, and then they have a prole / Communist religion which “nationalizes” all of your stuff. Or it can disappear during wars, national emergencies, monster attacks, or whatever the ruling elite comes up with to beat the upper middle class back into relative poverty.
Finally, with land, you have the same crap, only it involves things like property taxes and the courts. You’d better be “economically productive” enough to pay your property taxes, otherwise Snidely Whiplash and the banks will land-grab to drive you back into servitude.
So you see, the whole thing really is one giant hallucination; they can change the rules whenever they want to meet what they euphemistically call political necessity, and then whitewash it later in the history books as such.
As for the “reporting” on the market, it is done largely as repetition of abstract figures and transactions which one has to study and chart, but which only tell a fraction of the real story. There is no substitute for so-called “insider” information, whether gleaned intuitively by reading between the lines, or by actual observation, which most people simply do not have the time to do. The people who actually know what’s going on, know because they have the money to pay people to find out. Thus, they have the highest degree of valuable information. The newspapers have been hollowed out; even the Wall Street Journal. Sure, there’s more information online, but there is still no substitute for real-life HUMINT, which does not really include reporters and journalists, the vast majority of which are easily manipulated. By the way, I have read that a lot of private firms are hiring investigative reporters to make up for the short-fall in the “public” sector.
One more thing, per land ownership, it is well-known that our so-called law-abiding predecessors repeatedly made and broke contracts with Native Americans as a strategy to get their land.
Of course, they could have developed a system to exist contemporaneously, and the two groups could have mutually benefited from complementary lifestyles, but that would have required a display of common sense and intelligence.
One of your best posts yet, Ozzy, and mirrors the opinions of Eric Janszen (Itulip.com).
“Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight.” – Daniel Drew, 19th century speculator