• IP addresses are NOT logged in this forum so there's no point asking. Please note that this forum is full of homophobes, racists, lunatics, schizophrenics & absolute nut jobs with a smattering of geniuses, Chinese chauvinists, Moderate Muslims and last but not least a couple of "know-it-alls" constantly sprouting their dubious wisdom. If you believe that content generated by unsavory characters might cause you offense PLEASE LEAVE NOW! Sammyboy Admin and Staff are not responsible for your hurt feelings should you choose to read any of the content here.

    The OTHER forum is HERE so please stop asking.

ST endorsed Economist Desmond Lachman failed in his English?...

bic_cherry

Alfrescian
Loyal
ST endorsed Economist Desmond Lachman failed in his English?...

Should a significant pick-up in economic growth not materialise, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the Budget deficit and to a corresponding decline in public savings. That would lead to a significant widening of the trade deficit as the country's overall savings rate would decline.

Instead of 'as', the sentence should be read as 'whilst'... This is because the 'trade deficit' as described is a failure in 'economic growth'(manufacturing): such that because of unproductivity and overpricing of locally produced goods, the citizens end up still buying more foreign produced goods than local and the ultimate consequence of which being 'national trade deficit', the outcome of which being: "the country's overall savings rate would decline."
---------
I thus hope that straits times editors would proof read the international reports that they decide to include first rather than just blindly cut and paste grammatically incoherent reports from dubious foreign news sources as a brainless robot would do...


Trump's Budget proposals don't add up
Desmond Lachman
PUBLISHEDDEC 21, 2016, 5:00 AM SGT
One of the basic themes of Mr Donald Trump's election campaign was that the United States was being ripped off by foreign countries and that his administration would reduce our trade deficit.

Yet the Budget policies he is now proposing would be sharply at odds with that goal. By advocating an expansive budget through tax cuts and infrastructure spending, Mr Trump's plan would most likely lower national savings and propel the US dollar ever higher, creating the very conditions to widen rather than to narrow the trade deficit.

Mr Trump seems to be overlooking a matter of basic arithmetic. While a country's trade balance is the difference between its exports and imports, it is also the difference between the amount it saves and invests, as can be derived from rearranging the components of its aggregate demand equation. If a country saves more than it invests, it will run a trade surplus. Conversely, a country that saves less than it invests will run a trade deficit.

Seemingly oblivious to this basic maths, Mr Trump is proposing far-reaching and seemingly unfunded cuts in corporate and household tax rates. Worse yet, he is simultaneously proposing large increases in public infrastructure and military spending. He is doing so in the unrealistic hope that these policies will cause the economy to accelerate from its present 2 per cent growth rate to between 3 and 4 per cent. And he is counting on such faster economic growth to generate additional tax revenue.

Should a significant pick-up in economic growth not materialise, the net effect of these tax cuts and public spending policies will almost certainly lead to a significant widening of the Budget deficit and to a corresponding decline in public savings. That would lead to a significant widening of the trade deficit as the country's overall savings rate would decline.

A further basic weakness of the Budget proposal is that it would add stimulus to the economy at the very time that it is at or very close to full employment. That policy is bound to raise concerns about inflation and to push the Federal Reserve to raise interest rates more than it is contemplating in order to meet its inflation target.

One of the distinguishing characteristics of the global economy now is the divergence of monetary policy stances among the world's major central banks. The Fed is embarked on a path of raising interest rates at a time when the European Central Bank and the Bank of Japan are still engaged in aggressive rounds of quantitative easing in an effort to kick-start their moribund economies.

Forcing the Fed to raise interest rates at a faster pace than it is contemplating will only serve to widen the difference between it and the other major central banks. This would more than likely put further upward pressure on the dollar.

Since the November election, the US dollar has already appreciated significantly to its strongest level in the past 14 years. The last thing the country needs if it is to reduce its trade deficit is a further dollar appreciation. Such an appreciation would make our exports across the board more expensive in foreign markets and make our imports cheaper in US dollar terms. That would hardly seem to be the way to reduce the country's trade deficit.

A real concern is that, as the US external deficit widens because of a reckless Budget policy approach, Mr Trump will double down on his interventionist and protectionist approach to trade matters. As we saw in his recent intervention with Carrier Corporation, this seems to be his preferred way of dealing with trade issues. If he does go down that path, he will risk inviting trade retaliation by our trade partners, which could lead the global economy down the road to the beggar- thy-neighbour policies of the 1930s. As surely even Mr Trump must know, trade wars are no solution.

NYTIMES

•The writer, a resident fellow at the American Enterprise Institute, was a deputy director in the International Monetary Fund's policy development and review department.
http://www.straitstimes.com/opinion/trumps-budget-proposals-dont-add-up
 
Top