Fall 2005 Asia Supplement: Asia's Slow Growth Traps

Issue: Fall 2005

The U.S. trade deficit currently runs at the unusually highlevel of 5 percent of GDP, and something like 80 percent of the netdeficit has recently been funded not by private capital flows, butby foreign central bank purchases of dollars. U.S. netinternational indebtedness, which summed to less than 10 percent ofGDP in 1998 or 1999, now exceeds 25 percent of GDP and continues togrow. In late 2004 and early 2005 it became commonplace toanticipate that the dollar would plunge and interest rates wouldrise. Such prestigious figures as Paul Volcker and Joseph Stiglitzhave predicted that a dollar crisis is likely.

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