Strategic Analysis | September 2005

The United States and Her Creditors

Can the Symbiosis Last?

The main arguments in this paper can be simply stated:

1) If output in the United States grows fast enough to keep unemployment constant between now and 2010, and if there is no further depreciation in the dollar, the deficit in the balance of trade is likely to get worse, perhaps reaching 7.5 per cent by the end of the decade.

2) If the trade deficit does not improve, let alone if it gets worse, there will be a large further deterioration in the United States’ net foreign asset position, so that, with interest rates rising, net income payments from abroad will at last turn negative and the deficit in the current account as a whole could reach at least 8.5 per cent of GDP.

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