Brad Setser on the US Deficit

Brad Setser hits on a point that is not widely covered. the us has to serve their debt and this is becoming more and more a heavy burden on the current account deficit. especially after all the "cheap" debt from the past is rolling into higher rates......to bad that the us abandoned the 30 year .....has and with 59 trillion future liabilities the problem will only get worse..... http://tinyurl.com/2xyqto . make sure you read the entire brilliant piece from Setser and click on the headline!

Brad Setser beleuchtet hier mal wieder einen punkt der ansonsten in der diskussion oft vergessen oder unterschätzt wird. die zinslast die die usa aufbringen müssen um ihre gewaltigen schulden zu finanzieren wird immer mehr zu einem problem und lässt das defizit weiter ansteigen. das gilt besonders weil die billigen krediten jetzt in teurere refinanziert werden müssen.....jetzt rächt sich das die usa die 30 jährige staatsanleihe eingestampft haben ....und mit zukünftigen verpflichtungen von 59 trillion $ dürfte das problem nicht kleiner werden.....lest bitte unbedingt den ganzen bericht von Setser und klickt auf die überschrift!

I think the income balance is poised to deteriorate significantly. That is the real source of my pessimism. The market no longer expects the Fed to ease by much. Short-term rates will stay around 5%. And long-rates have moved close to 5%. That suggests to me that the interest bill on the United States external debt is set to rise: the US will be taking on new debt at 5% plus to cover its deficit, as well as rolling over an awful lot of old debt at higher prices

I consequently expect the income balance to emerge as an important drag on the US current account deficit. If my forecast on the income balance is close to correct, it implies a rise in the current account deficit even if the trade deficit stabilizes in nominal terms and starts to fall as a percent of US GDP.
größer/bigger headline

Financing capital flight / Brad Setser

interesting stuff from Brad Setser. click on the headline to read the full piece. i also highly recommend his excellent blog

http://www.rgemonitor.com/blog/setser/

bemerkenswertes wie so oft von Brad Setser. klickt bitte auf die überschrift um den rest zu lesen. kann seinen erstklassigen blog uneingeschränkt empfehlen. wirklich klasse.

The other story in the March data? The big rise in US purchases of foreign securities. US residents bought about $40b of foreign securities, including an usually large amount of foreign debt -- $32b.

That is one reason for the dollar’s weakness.

It also explains the weak total TIC flow number in March. The $100b in headline foreign purchases of US debt and equities is deceiving. Net inflows were a bit under $50b – less than the March current account deficit ($75b or so)

If sustained, that level of “diversification” by US residents implies rather large outflows – about $500b a year. To finance that level of outflows and its current account deficit, the US would need to attract about $1400b in inflows.
That is a lot. It might imply the US would need a bigger credit line than even the People’s Bank of China is willing to provide. Financing the United States current account deficit is one thing. The current account deficit is the counterpart to China’s current account surplus (read export jobs). Financing capital flight (i.e. portfolio diversification) by US residents is another …

Inflation in Saudi Arabia / Brad Setzer

after questioning the us quality of measuring cpi i think was to harsh... (click labels)

here comes saudi arabia!

thanks to brad setser and his excellent blog. http://www.rgemonitor.com/blog/setser/

nachdem ich ja in der vergangenheit die eigenarten der us erhebung des cpi kritisiert habe relativiert sich die kritik wenn man sieht wie kreativ saudi arabien vorgeht.

empfehle zudem den link und den blog von brad setser.


The details reported in the Sfakianakis paper left me more convinced that the Saudi data – which shows a 3.5% y/y increase in prices – understates actual inflation. Some tidbits:

• The price of a schawarma sandwich is up 30% in the last 18 months.


• Fresh fruit prices are up between 50 and 80% (y/y), and vegetable prices are up 20-40%, according to an informal survey. It seems that higher paying construction jobs are pulling imported labor out of agriculture (cement factories are at 100% of capacity).


• Beef prices are up 15%, Fish prices are up 20-35% (all y/y).


• Rents in Riyadh are up 20-25% y/y


• Wages for high-end construction jobs are up 50% -- and Saudi contractors are complaining of a shortage of imported labor at the low-end.

All in all, that doesn’t sound to me like an economy with 3.5% inflation, even if the price of a telephone call is falling. A cut in fuel prices (yes, a cut -- nothing like sitting on a big pool of oil) in 2006 did help hold down 2006 inflation, but no further cuts are expected in 2007 ...