Saturday, January 07, 2006

Deficits don't matter

OPEC, Russia to pick up US deficit slack:

THE principal source of money to finance the cavernous US current account deficit is shifting from Asia to Organisation of the Petroleum Exporting Countries members and Russia, a move that may undermine world financial stability.

An analysis of global payments balances by ANZ chief economist Saul Eslake concludes that it cannot be assumed that the surpluses of the oil-producing nations will be recycled back to the US as smoothly as have Asia's surpluses.

The US has consistently defied the doomsayers by running ever-larger deficits without the least flicker of concern on bond markets.

Eslake notes that the Organisation for Economic Co-operation and Development warns every six months that the global payments imbalances are unsustainable. Its latest forecast is for the deficit to surpass $US800 billion ($1.05 trillion) in 2005, rising to $US980 billion by 2007.

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