Update, and More on the Way

I want to apologize to everyone, for the past couple of weeks I have been studying for and taking final exams. However, now I am on break from school and should have plenty of time to post on a regular basis. With that said, let me give you a quick quote to think about, I promise more coming soon.

Stephen Roach: A $40 trillion world economy is woefully out of balance. This shows up in many forms, but the most glaring sign is an unprecedented disparity between the world's current account deficits (America) and surpluses (mainly Asia and, to a lesser extent, Europe). The key to a successful global rebalancing hinges critically on tempering the risks of the world's most serious excesses. For me, that speaks of a shift in the world's relative price structure -- namely, currencies -- in order to re- establish a more sustainable equilibrium. That's where the dollar comes into play. But currency adjustments can't do it alone. A weaker dollar could also be key in forcing the interest rate adjustments that address the asset-driven excesses of the American consumer -- quite possibly the biggest risk factor in today's US and global economy. If the depreciation of the dollar implies tough adjustments elsewhere in the world -- like forcing export-led Asian and European economies to stimulate domestic demand -- then that's not such a bad thing either. Global rebalancing is a shared responsibility.

From
Debating the Dollar December 10, 2004 Morgan Stanley Global Economics Team

Timothy Burger