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					            MSNBC
        [Moscow, 1-30-98]

“The   central bank said from
 Monday its refinancing rate would
 rise to 42 percent, its highest level
 for nine months and double the 21
 percent it had fallen to in October
 before the Asian crisis engulfed
 Russian markets.”
            MSNBC
        [Moscow, 1-30-98]

“The  refinancing rate is the rate at
 which major banks can borrow
 overnight money from the central
 bank, and indicates where the
 central bank believes the ceiling
 for Treasury bill yields should be.”
          MSNBC
      [Moscow, 1-30-98]

“Raising   the refinancing rate
 lets yields rise to a level where
 Treasury bills and bonds may
 again be attractive, and could
 help staunch the flood of money
 out of Russia.”
      Chapter 5:

The Balance of Payments
    and International
  Economic Linkages
Balance of Payments


     ???
   Balance of Payments

Net value of all economic
 transactions - including trade in
 goods and services, transfer
 payments, loans, and
 investments - between residents
 of the same country and those
 of all other countries.
        BoP and GDP
GDP  C  I  G  ( X  M )
where :
C  consumption spending
I  capital investment spending
G  government spending
X  exports of goods and services
M  imports of goods and services
(X - M )  balance on current account
      BOP and GDP – 2009-II
   Source: Bureau of Economic Analysis
             [www.bea.gov]


GDP  C  I  G  ( X  M )
14,150  9,180  1,628  2,562  339
  BoP and GDP – 2009-II
[GDP = C + I + G + (X – M)]
     Top 5 Countries with
which the U. S. Trades, 2009-08
 Country   Total-2009    Total-2008
            [Bils., $]    [Bils., $]
      Top 5 Countries with
 which the U. S. Trades, 2009-08
  Country   Total-2009    Total-2008
             [Bils., $]    [Bils., $]
Canada        235.9         596.9
China         194.8         409.2
Mexico        163.7         367.5
Japan          79.6         205.8
Germany        63.7         152.3
Top 5 Countries with which the U. S.
   has a Trade Deficit, 2009-08
 Country   Deficit-2009   Deficit-2008
            [Mils., $]     [Mils., $]
Top 5 Countries with which the U. S.
   has a Trade Deficit, 2009-08
  Country   Deficit-2009   Deficit-2008
             [Mils., $]     [Mils., $]
China        -123,468       -266,333
Canada        -10,744        -74,641
Japan         -21,834        -72,669
Mexico        -24,108        -64,376
Germany       -14,761        -42,821
Top 5 Countries with which the U. S.
   has a Trade Surplus, 2009-08
 Country    Surplus-2009   Surplus-2008
              [Mils., $]     [Mils., $]
Top 5 Countries with which the U. S.
   has a Trade Surplus, 2009-08

  Country     Surplus-2009   Surplus-2008
                [Mils., $]     [Mils., $]
Netherlands      9,994         19,083
Hong Kong        9,300         15,149
UAE              6,150         14,455
Singapore        3,675         12,925
Australia        6,022         11,874
 Balance of Payments Accounts

Current Account
Financial Account
Capital Account
Errors and Omissions
Reserves and Related Items
 Balance of Payments Accounts

Current Account: (millions)
Goods - 2008: - $821,153
Services - 2008: + $144,054
Net Amount       - $677,099
 Balance of Payments Accounts

Financial   Account
  – Direct foreign investment
  – Portfolio investment
  – Other capital investment – short-
    term financial transactions
 Balance of Payments Accounts

Capital   Account:
 – Debt forgiveness
 – Assets transferred by people who
   move from one country to another
 – Sale of patents and trademarks
 Balance of Payments Accounts

Double  Entry System:
debits offset credits
sum of transactions equals zero
unaccounted for differences are
 recorded as statistical discrepancy
 Balance of Payments Accounts

Debit Entries:
purchase of foreign goods,
 services, or assets
decline in foreign liabilities
 Balance of Payments Accounts

Credit Entries:
sale of domestic goods, services,
 or assets
increase in foreign liabilities
 Balance of Payments Accounts

Current Account
Financial Account
Capital Account
Errors and Omissions
Reserves and Related Items
 International Account Relationships

Current 
Account    Private  - Private  Govt. 
             Savings  Investment - Deficit 
Balance                                    
        
              Savings Rate (%)




               0
               2
               4
               6
               8
              10
              12
              14
              16
              18
  Br
     ita
         in
    Ne
       th
     US
        A
    SW
         Z
  Sp
       a in
 Au
     str
         ia
    GE
          R
Ca
    na
        da
Be
                                     [OECD, 1980-88]




   lgi
       um
 Fr
    an
        ce
  Ja
                                 Americans Are Poor Savers




      pa
          n
       -750
              -650
                     -550
                            -450
                                   -350
                                          -250
                                                 -150
                                                        -50
                                                              50
                                                                   150
                                                    1981
                                                    1982
                                                    1983
                                                    1984
                                                    1985
                                                    1986
                                                    1987
                                                    1988
                                                    1989
                                                    1990
                                                    1991
                                                    1992
                                                    1993
                                                    1994




Year
                                                    1995
                                                    1996
                                                    1997
                                                    1998
                                                    1999
                                                    2000
                                                    2001
                                                    2002
                                                    2003
                                                    2004
                                                                         U. S. Balance on Goods, Services,
                                                                         and Income 1981-2007 ($, Billions)




                                                    2005
                                                    2006
                                                    2007
       U. S. Balance of Trade, 1954-2008
               [Goods & Services]
300

100
       1954
              1964
                     1974
                            1984
                                   1993
                                          1994
                                                 1995
                                                        1996
                                                               1997
                                                                      1998
                                                                             1999
                                                                                    2000
                                                                                           2001
                                                                                                  2002
                                                                                                         2003
                                                                                                                2004
                                                                                                                       2005
                                                                                                                              2006
                                                                                                                                     2007
                                                                                                                                            2008
-100

-300

-500

-700

-900

                                                        Goods                Services
 How to cope with the trade deficit?

Currency  depreciation
Protectionism
End foreign ownership of U. S.
 assets
Increase the savings rate
  Should We Devalue the $?
Overvalued   currency
  – tax on exports; subsidy to imports
Weaker currency should reduce
 deficits
Contrary to U. S. experience
“J-curve” theory
                               The Theoretical J-Curve
                              8

                              6                                Trade balance
Net change in trade balance




                                                               eventually
                              4                                improves

                              2
                                   Currency depreciation
                              0

                              -2

                              -4                       Trade balance
                                                       initially deteriorates
                              -6
                                                       Time
       Protectionism:
     Tariffs, Quotas, etc.
Each raises domestic prices
 and erodes purchasing power
Lower standard of living
Tend to reduce both imports
 and exports - deficit remains
 unchanged
  “Clinton Imposes Tariffs on Steel
    Imports That Exceed Quota”
       [New York Times, 2-12-00]
“President  Clinton imposed tariffs
 on steel imports valued at $410
 million today, answering pleas
 from steel makers and labor unions
 but raising tensions with South
 Korea, Brazil, Germany, Japan and
 other major trading partners.”
 “Clinton Imposes Tariffs on Steel
   Imports That Exceed Quota”
        [New York Times, 2-12-00]
“The  duties, which take effect
 immediately, will sharply raise the
 price of steel imports that exceed a
 quota pegged at 1998 import
 levels. The United States says it
 was flooded with steel imports in
 1998 and 1999.”
 “Clinton Imposes Tariffs on Steel
   Imports That Exceed Quota”
        [New York Times, 2-12-00]
“The  action places a 10 percent
 duty on wire rod and a 19 percent
 surcharge on line pipe, with the
 duties phased out over three years.
 The duties will hit only those
 imports that exceed the 1998
 baseline.”
    “WTO panel rules that U. S.
      steel duties are illegal”
         [MSNBC, 7-11-03]

“In a stinging rebuke to the United
 States, the World Trade Organi-
 zation ruled Friday that heavy
 duties on steel imports imposed by
 the Bush administration violate
 global trade rules.”
      “WTO panel rules that U. S.
        steel duties are illegal”
           [MSNBC, 7-11-03]

“A  three-member panel of trade
 experts said in a 968-page ruling
 that the “safeguard” duties of up to
 30 percent … were out of line with
 WTO rules.”
    “WTO panel rules that U. S.
      steel duties are illegal”
          [MSNBC, 7-11-03]

“Washington    immediately said it
 would appeal, and would keep in
 place the tariffs that President Bush
 had justified as necessary to protect
 domestic steel producers against a
 flood of cheap imports during a
 restructuring period.”
    “WTO panel rules that U. S.
      steel duties are illegal”
          [MSNBC, 7-11-03]

“In  response, the European Union
 stepped up plans to impose $2.2
 billion in retaliatory duties on U. S.
 imports, ranging from footwear to
 fruit and vegetables – possibly
 pricing them out of the market.”
“Bush Administration to Impose Tariff
 on Softwood Lumber from Canada”
     [Wall Street Journal, 8/10/01]

“The Bush administration announced
 Friday that it would impose a 19.3%
 penalty tariff on softwood lumber
 imported from Canada in retaliation for
 what the U. S. said were unfair
 government subsidies given to the
 Canadian lumber industry.”
“Bush Administration to Impose Tariff
 on Softwood Lumber from Canada”
       [Wall Street Journal, 8/10/01]

“An  economist for the National
 Association of Home Builders said the
 higher tariffs could add up to $1,000 to
 the cost of a new home.”
      Cross-Border M&A Moves
       Fan Protectionism in EU
      - The Wall Street Journal, 2/27/06
“French  Prime Minister
 Dominique de Villepin’s
 government has arranged for the
 merger of Suez and Gaz de France
 in a $37.98 billion deal, in an effort
 to fend off a hostile bid for Suez by
 Italy’s Enel.”
        Cross-Border M&A Moves
         Fan Protectionism in EU
        - The Wall Street Journal, 2/27/06
“The  efforts to fight off foreign
 buyers of publicly traded
 companies come amid a wave of
 cross-border takeovers in Europe
 and underscore how nationalism
 continues to thwart the integration
 of the Continent’s economy.”
        Cross-Border M&A Moves
         Fan Protectionism in EU
        - The Wall Street Journal, 2/27/06
“The  moves will test Europe’s
 commitment to enforcing a free
 flow of capital and whether
 Brussels has the means to face
 down protectionism in two of the
 European Union’s most powerful
 capitals, the Journal writes.”
      Cross-Border M&A Moves
       Fan Protectionism in EU
      - The Wall Street Journal, 2/27/06
“This  is the first opportunity the
 prime minister has to demonstrate
 he can do something concrete
 about his doctrine of economic
 patriotism ...”
    End Foreign Ownership
        of U. S. Assets
Increase domestic interest rates
Result: more domestic savings
Result: domestic investment will
 fall
Result: slower economic growth
 Stimulate Domestic Saving
Provide   tax incentives for
 saving:
 – Traditional IRA Accounts
 – Roth IRA Accounts
 – 401(k) & 403(b)(7) plans
 – Section 529 plans
“U.S. Trade Deficit Widens, ...”
  [New York Times, 9/21/95]
“In  the long run, according to
 textbook economics, the huge
 American trade gap is an inevitable
 result of the nation’s saving too
 little [in order] to finance a high
 level of consumption.”
“U.S. Trade Deficit Widens, ...”
  [New York Times, 9/21/95]
“Foreigners  essentially lend to the
 United States the difference,
 obtaining the wherewithal by
 selling more goods and services
 here than they buy.”

				
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posted:11/15/2011
language:English
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