United States or Slovenia ? Vote for the TOP Country of the Week !
A less sanguine Kenneth Rogoff, the IMF's new Chief Economist wrote in "The Economist" in April: "When countries run sustained current-account deficits up in the range of 4 and 5% of GDP, they eventually reverse, and the consequences, particularly in terms of the real exchange rate, can be quite significant." Rogoff alluded to the surreal appreciation of the dollar in the last few years.
As he charges interest in current-account at the rate of 5 per cent, so he allows the same. His profit, therefore, quoad the interest on current-accounts and balances in hand, is nil; but for the trouble of managing accounts and for discounts, his charge is five shillings per L.100. In lending out his capital, he realises five per cent more upon that.
But however precarious and over-leveraged the financing of individual American borrowers-including American banks, which intermediate such borrowing internationally-might be, they are invulnerable to dollar devaluation. In effect, America's collective current-account deficits are sustainable indefinitely."
Word Of The Day