Richard A. Iley Untangling the US Deficit, Evaluating Causes, Cures and Global Imbalances (2007)

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.Between 2002 and 2005, net oilexports of the fuel-exporting countries rose by US$437 billion.By com-parison, between 1973 and 1981, net oil exports increased by almost exactlythe same amount, US$436 billion (although relative to world GDP thefirst episode was larger, 1.9 per cent against 1.2 per cent).In 2005, currentaccount surpluses of the oil exporting countries at US$350 billion wereabout the same level as the East Asian countries.In 2006, the oil exporterssurpluses amounted to US$396 billion.However, these figures conceal aconsiderable size imbalance.The three largest non-US oil producers areSaudi Arabia, Russia and Iran, and they produce around one-quarter ofthe world s oil.Other large holders of proven oil reserves are, in descend-ing order, Iraq, Kuwait, United Arab Emirates, Venezuela, Kazakhstan,Libya and Nigeria.In the first oil shock, the oil exporters held mainly short-term dollar bal-ances which were recycled to developing countries through the Eurodollarbanking system.This time the major global borrower is the United Statesitself, and the funds have come to US financial markets in a variety of ways,very different from in the earlier episode.For example, oil money from theMiddle East tends to flow to the United States through European banks(sometimes via the repayment of debts incurred when oil prices were low)or by means of the international bond market (Eurobonds).Other oil rev-enues are thought to have found their way into hedge funds (Gottliebsen,2006).Even Gulf oil producers investments such as those in oil refineriesin China or telecoms in Egypt are US dollar-based.Thus the pattern is verydifferent from the first oil shock.In the 1970s, the oil exporting countriesheld their petrodollars in short-term, liquid deposits with internationalThe demand for US assets 185banks, but the funds were intermediated via the international bankingmarkets to what turned out to be risky borrowers.Now the oil revenues arebeing invested in long-term bonds and other more risky assets, but many ofthe funds are finding their way through many channels to the world s safestborrowing nation (Wolf, 2006c). Demographic FlowsHowever, it would be a serious oversight to regard the current constellationof global capital flows as simply the economic perversion of the poorperiphery financing the rich United States with the more recent overlay offlows from oil exporters to oil importers.The picture is more complex, moreheterodox than simply mercantilist Asia and cash-flush oil exportersfinancing the United States.As important, arguably more so, is the fact thatso many other rich economies are running unusually high current accountsurpluses (see Cooper, 2006 and also Backus et al., 2006).As Table 7.3reveals, the increases in the current account surpluses of Japan, Germany,the Netherlands and Switzerland can arithmatically account for over 70 percent of the widening in the US current account deficit from 2000 to 2006.Table 7.3 Global current account balances, selected years 1997 2006(US$ billion)1997 2000 2006 2006 2000 % of USchange2000 2006US 141 416 811 395 n/aJapan 97 120 170 50 12.7Germany, Netherlands, 41 5 263 258 65.3SwitzerlandOther rich countries 68 23 139 162 41.0China 34 21 239 218 55.2Other developing Asia 27 26 12 38 9.6Central and East Europe 21 32 89 57 14.4CIS 9 48 9951 12.9Middle East 11 70 212 142 35.9Latin America 67 48 49 97 24.6Africa 6 7 20 13 3.3Discrepancy 14 176 1 177 44.8Memo: fuel exporters 16 149 396 247 62.5Sources: IMF World Economic Outlook; Richard Cooper (2006); authors own calculations186 Untangling the US deficit40.0Gross capital formation as a % of GDP37.535.0Japan32.530.027.5Switzerland25.022.520.0Germany17.515.01970 1975 1980 1985 1990 1995 2000 2005Sources: World Bank; authors calculations; Reuters Ecowin Pro (measured at currentprices).Figure 7.5 Investment in Japan, Germany and Switzerland, 1970 2005(Gross capital formation as a % of GDP)(China s surplus, by contrast, accounts for about a half of the post-2000change.) These increased surpluses in developed countries seem to reflectlow investment rather than sharp increases in saving an investment dearth more than savings glut.Partly, the phenomenon is a cyclical onereflecting the low growth performance of recent years but it is also likely tobe in part structural due to the demographic outlook of these economies.All of these economies have seen the share of investment in GDP slump (asshown in Figure 7.5 in the case of Germany, Switzerland and Japan tothe lowest levels since 1970) without a correspondingly offsetting fall innational savings rates.The fall in investment in these economies may par-tially reflect their policy frameworks and the structure of their financialsystems (the investment share has fallen significantly in the UK over thesame period but savings have fallen even further) but also demographics.These are economies with rapidly ageing populations, the working agepopulations of which are set to shrink significantly in the next few decades.There is simply less need to invest in physical capital.In a prescient point, Richard Cooper notes that, of the four majoreconomies the United States, Japan, Germany and China only theUnited States, due to higher birth rates and immigration, is projected to seeits working age population grow over the next 20 years or so (Cooper,2006).By 2050, today s figure of 300 million Americans is projected toexceed 400 million, according to UN World Population Prospects and theUS Census Bureau (The Economist, 14 October 2006, p.37).It accordinglyThe demand for US assets 187seems fair to attribute a significant portion of the unusually high demandfor US assets as constituting finance from old to young [ Pobierz całość w formacie PDF ]

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