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    October 16

    Long Term Consequences of Current Account Deficit

    • Taxes have to go up.
    • Inflation has to climb, lowering the purchasing power of the borrowed dollars and the real cost of interest payments.
    • Interest rates have to climb to attract enough money back to the United States to finance economic growth.
    • The dollar has to fall, so we can pay our debts more cheaply.
    • We have to sell more assets to overseas investors.
    • U.S. Workers have to take more wage cuts.
    • U.S. consumers have to cut back on spending.