The recent fall of the dollar is not a surprise, says Stephen S. Roach, chief economist for Morgan Stanley. It is the logical outgrowth of an unbalanced world economy, and America’s gaping current account deficit.
Roach argues that these global imbalances are a shared responsibility. America is guilty of excess consumption, whereas the rest of the world suffers from insufficient consumption:
America’s consumption binge has its mirror image in excess savings elsewhere in the world especially in Asia and Europe. For now, the United States draws freely on this reservoir, absorbing about 80 percent of the world’s savings. This cannot continue indefinitely and thus, the dollar is beginning to fall.
Roach argues that as the dollar declines:
Source: Stephen S. Roach, When Weakness Is a Strength, New York Times, November 26, 2004.
For text http://www.libertypost.org/cgi-bin/readart.cgi?ArtNum=76754
For more on Economic Issueshttp://www.ncpa.org/iss/eco/
FMF Policy Bulletin/ 14 December 2004
