Tuesday, May 24, 2005

On US Deficits and China’s Progress

Runaway deficits in the US would not be sustainable over a long period of time. Some things have got to give. And there is no end in sight for the government expenditures that are causing these deficits – the wars, homeland security, even illegal immigration, etc.. So who knows what the future holds.

We can only try to monitor these deficits as we move along and try to find any rationalization. During the Reagan years the deficits peaked at 6% of GDP and fortunately this has not been reached yet. This economy continues to grow robustly. Just for this current year alone, quarterly figures show 3-4% growth of GDP. Thus, while in dollar values the deficits are record highs, they still have not reached that percentage peak during Reagan’s terms.

What can any country do, not just the US, under these very uncertain times? Countries under the EU continue their very anemic growth in their economies, mostly at 1% or even lower. They cannot compare to China’s sustained growth of about 9%.

Thus, while China continues to be frowned upon by the supposedly more civilized countries of the world as having such a repressive government, its sustained growth continues to bring employment, progress and hopefully, enlightenment, to its billion people.

I believe that that is a silver lining.

And re the US economy, figures are hard to dispute. We continue to see good figures for jobs created, and the unemployment rate has not moved much. As a matter of fact, the dailies here show the rate moving down in some counties.

True also, the stock markets have not been encouraging. Quite volatile. And I had thought it would break into the 11,000 mark. But again we cannot close our eyes to these uncertain times. The price of oil and consequently, gasoline prices have been big dampers to the economy. The players in the markets are easily scared and unnerved.

Many may find causes to fault the US economy at this time, but in so doing one needs only to see its reflection in the mirror to realize that whatever the US is going through ripples through the entire world.

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