Bond Outlook [by bridport & cie, September 21st 2005]
| The US economy and the Fed have, as we expected, shrugged off the effects of Katrina, basically ignoring the longer-term impact, which we would qualify as worsening an already greatly imbalanced US and world economy. Let us hope Rita does less damage. The weekly Webcast by Roach (MSI) includes some interesting data: |
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| The world imbalance as measured by the current account deficit of the deficit countries or the current surplus of the surplus countries is at an unprecedented 5% of world GDP. |
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| That the USA alone accounts for 70% of the total deficit. |
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| That the largest contribution to the surplus is Japan's at 15%, while China is in only fifth position at 7%. |
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| These data may help answer the perennial question about "whose fault is the imbalance?" Bush apologists obviously blame China. However, you do not have to be viscerally anti-Bush to observe that the 70% sticks out like a sore thumb. Could higher spending by Asian countries solve the imbalance? We would have thought so, but neither the World Bank nor the IMF take this view. |