Reply #39: I.M.F. Warns of Imbalance in World Consumption (because of U.S.)

[UpInArms]

http://www.nytimes.com/2005/09/22/business/22outlook.html

WASHINGTON, Sept. 21 - The United States is likely to experience slower economic growth next year, and its rapidly rising foreign debt is at the heart of dangerous global imbalances, the International Monetary Fund said Wednesday.

The fund said that global economic growth had become too dependent on a handful of countries, led by the United States, that consume far more than they produce. That imbalance, it warned in its semiannual World Economic Outlook, could lead to a wrenching correction.

In an evident reference to the United States, with its big budget deficits and relentless consumer spending, the I.M.F. warned that the world's consumption is "fueled by increasingly unsustainable fiscal stimulus, as well as housing prices that are ignoring the laws of gravity."

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The United States' total trade deficit is expected to approach $700 billion this year and to be around 6 percent of the gross domestic product. Put another way, the United States is soaking up a record share of the world's savings and investment money. As it has in the past, the fund said the American financial imbalance had been aggravated by the large budget deficits.

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