IMF warns trade gap could bring down dollar -US to grow at only 2.6%

[papau]

http://www.guardian.co.uk/usa/story/0,12271,1045369,00.html

IMF warns trade gap could bring down dollar

Charlotte Denny and Larry Elliott Friday September 19, 2003
The Guardian

The International Monetary Fund yesterday warned that the colossal United States trade deficit was a noose around the neck of the economy, emphasising that the once mighty dollar could collapse at any moment.Arguing that the world's big economies were already too dependent on the willingness of American consumers to live beyond their means, the IMF said the US could not continue to run a current account deficit of 5% of GDP. The IMF's chief economist Kenneth Rogoff said that it was just a matter of time before the gap closed, tipping the dollar into a potentially steep fall. <snip>

...slide in the dollar's value is likely to slow US growth...collapse of world trade talks last weekend in Cancun could spell disaster for a global economy .... global poverty would rise if protectionism took root in the world's biggest economies...Wars in Iraq and Afghanistan and heightened geopolitical tensions worldwide after the September 11 attacks on the US would "unquestionably" hold back growth in the decades ahead, Mr Rogoff told reporters. <snip>

"The failure of the talks in Cancun will cast something of a cloud over the meeting."That is not a happy background in which to assess the durability of the recovery."Misalignments between the world's biggest currencies are also likely to feature on the agenda, with the US hoping other countries will support its campaign to get China to strengthen its currency, the yuan.Following an upgrading of its growth prospects by the fund, the US is expected to expand by 2.6% this year<snip>

[Resistance Is Futile]

1. Economic warfare and realpolitik

Let's be completely honest here.

Chinese fiscal policy in holding the Yuan low amounts to a particularly vicious form of economic warfare where the Chinese government is using American capital and the greed of American businesses to undermine the American economy. If the Chinese refuse to yield and float the Yuan then they have a fairly good chance of obliterating the US as an economic power.

This is obviously bad news for anyone in the west, but it is very good for the Chinese as they will be able to get rid of America economically before PNAC is able to get rid of the Chinese militarily.