Federal Reserve Chairman Alan Greenspan delivered a blunt warning Friday that foreign investors might get sick of subsidizing the nation's widening trade and budget deficits, remarks that caused U.S. financial markets to tremble.
Greenspan's comments, delivered before an audience of central bankers in Frankfurt, Germany, sent the dollar near its record low against the euro, Europe's common currency. The three leading U.S. stock indexes each dived more than 1 percent, and long-term bond yields rose, making borrowing more expensive.
What rattled markets was Greenspan's warnings about the U.S. current account deficit, a broad measure of dollars Americans send abroad and foreigners send back to the United States. Most of the gap is made up of the trade deficit, the imbalance between the goods and services Americans import and what the nation sells abroad.
According to current account calculations, the United States went into hock by a record of more than $540 billion in 2003 and is on track to pass $600 billion in 2004 -- a deficit that, so far, largely has been underwritten by foreigners who send investment dollars back into this country. Much of those returning dollars have gone to buy U.S. government debt, helping finance the other gaping deficit in the U.S. economy -- the federal budget shortfall.
Greenspan Friday raised the question of how long that would go on. The Fed chief said foreign investors might grow wary of holding U.S. stocks, bonds and other investments, suggesting that could drive down demand for dollars.
SF Gate articleGreenspan's comments, delivered before an audience of central bankers in Frankfurt, Germany, sent the dollar near its record low against the euro, Europe's common currency. The three leading U.S. stock indexes each dived more than 1 percent, and long-term bond yields rose, making borrowing more expensive.
What rattled markets was Greenspan's warnings about the U.S. current account deficit, a broad measure of dollars Americans send abroad and foreigners send back to the United States. Most of the gap is made up of the trade deficit, the imbalance between the goods and services Americans import and what the nation sells abroad.
According to current account calculations, the United States went into hock by a record of more than $540 billion in 2003 and is on track to pass $600 billion in 2004 -- a deficit that, so far, largely has been underwritten by foreigners who send investment dollars back into this country. Much of those returning dollars have gone to buy U.S. government debt, helping finance the other gaping deficit in the U.S. economy -- the federal budget shortfall.
Greenspan Friday raised the question of how long that would go on. The Fed chief said foreign investors might grow wary of holding U.S. stocks, bonds and other investments, suggesting that could drive down demand for dollars.
A couple weeks ago, Larry Chin's article on the stolen election was published on numerous internet sites. Within that article, there was a link to a webpage of mine which contains an article by Al Martin discussing the deficit funny business and Alan Greenspan. That spiked my webpage traffic five-fold. It's an older article, but the current steady drop of the dollar makes it a timely one nonetheless. If you haven't already read it, go check it out: The Case for Sedition: High Crimes of the Bush Cabal
...but hey, do what you want...you will anyway.
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