The billion dollars a day problem

Article Abstract:

The US deficit has reached an estimated $25 billion, a level that could pose a threat to financial markets. The current account deficit means that the US has to borrow from abroad, and foreigners may decide not to buy US assets due to high equity valuations, or due to opportunities elsewhere. The debt will have to decrease, since it is increasing more rapidly than gross domestic product. This will mean a drop in import growth, which means slower domestic demand growth, so slower growth in output, which in turn affects profits. There is some hope, however, from rising export orders.

Balance of Payments, Wall Street, Balance of trade

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Not off the hook

Article Abstract:

The Asian financial crisis is likely to persist in the short term, despite bet agreements for Indonesia and South Korea. Morgan Stanley has revised growth rates downwards for some countries in the region, and is not optimistic about currency rises. Corporate earnings are also likely to be affected over the short term. Merrill Lynch notes the impact of higher import and financing costs as a result of the crisis. There is also concern about social and political stability, and about a possible devaluation by China.

Asia, Financial markets

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