Hole in the Pocket – Moon of Alabama

September 14, 2004

Hole in the Pocket

U.S. Q2 current account deficit widens to $166 billion

The U.S. current account deficit widened to a record $166.2 billion in the second quarter from $147.2 billion in the first quarter, the Commerce Department estimated Tuesday

The deficit increased to a record 5.7 percent of gross domestic product during the June quarter

The current account deficit is the broadest measure of the nation’s economic balance sheet with the rest of the world. It encompasses both trade and capital flows.

Thanks to the US of A for the transfer of $166 billion in U.S. financial assets, stocks, bonds, etc to foreign countries. Let´s hope they will use it wisely.

Usually forgotten in the comments and calculations – the interest, dividends, and capital gains earned on these assets in subsequent years will go to foreigners and will therefore largely escape US taxation.

This years new transfer to foreigners will be over $600 billion. Even if foreigners may only get a meager 3% dividend on this, there will be $18 billion of US generated profits per year in the forseeable future that will not be taxed in the US but will help other nations budgets.

There is a big hole in the pocket of Uncle Sam and someone will need to fix this.

Posted by b on September 14, 2004 at 19:01 UTC | Permalink

Comments

Thanks to the US of A for the transfer of $166 billion in U.S. financial assets, stocks, bonds, etc to foreign countries. Let´s hope they will use it wisely.
Sweet and succinct. Like a Rocky Marciano uppercut.
But is there a silver lining?
Yes and no. Perhaps and maybe.
I suspect there is more going on here than meets the eye. For now, let me confine myself to one corner of this spendthrift puzzle. As such, here is a series of questions I need answered:
Suppose interest rates rise. Bond coupons follow suit.
What happens to bond prices? They sink right? Given that the Chinese govt. is heavily invested in US treasury bonds purchased at these historically low coupon rates… what happens to their assets when the prices of their purchased bonds drop through the floor?
Are they happy or sad?
How happy? How sad?

Posted by: koreyel | Sep 14 2004 20:45 utc | 1

I guess electricity and sewers will not be going back to pre-war levels any time soon, eh?

Posted by: Kate_Storm | Sep 15 2004 0:57 utc | 2

The US of A will have to default on those binds someday. So don’t let your financial advisor sell you on bonds.
Further, if people would put their money in local independently owned banks and Credit Unions this country would boom. Pull out of the market and all it’s trappings. This house of cards is about to fall. Am I chicken little? No, just being cautious.

Posted by: jdp | Sep 15 2004 2:22 utc | 3

Does the NYT Editorial finally sees some light? Taxes for an Ownership Society

When President Bush talks about an “ownership society,” hold on to your wallet. The slogan, like “compassionate conservative” before it, is sufficiently vague to mean many things to many people, and the few details that Mr. Bush has provided – bolstered home ownership and new tax-sheltered savings plans – seem innocuous enough. But in tax terms, “ownership society” means only one thing: the further reduction, if not the elimination, of taxes on savings and investments, including taxes on dividends and on capital gains on stocks, bonds and real estate. That, in turn, means – by definition – a shift in the tax burden onto wages and salary – or, put more simply, a wage tax.
…
In 2004, take-home pay as a share of the economy dropped to its lowest level since the government started keeping records in 1929.
All of this would make the drive for a wage tax laughable, if only it were a joke. And yet, when he says “ownership society,” a wage tax is exactly what Mr. Bush is driving at.

Posted by: b | Sep 15 2004 7:02 utc | 4

In a metaphor borrowed from Paul Krugman: Wile E. Coyote has stopped running in mid-air, and he is now looking down. He will soon look at the beholders and gulp loudly before he starts falling downwards, out of view, causing a cloud of smoke when he hits the ground.
Toon logic: After a moment of serious physical damage, he will climb unharmed out of the hole in the shape of his body. Oh please, oh please…

Posted by: teuton | Sep 15 2004 12:52 utc | 5

Concatenate a quote time:

That, in turn, means – by definition – a shift in the tax burden onto wages and salary – or, put more simply, a wage tax on wage slaves.

Any raising of consciousness must necessarily follow the vocabulary.
Call a wage slave a wage slave.
Differentiate the spectrum this way:
Alpha-plus wage slaves thru Gamma-minus wage slaves.
That should make at least one Huxley smile. Although, he would be shocked to hear that soma is so thouroughly banned in our dull brave new world:

Eighty-one percent of large employers now require preemployment drug testing, up from 21 percent in 1987. Among all employees, the rate of testing is highest in the South…

~Barbara Ehrenreich in Nickel and Dimed.
Do you suppose America’s Ruling Class¹ did a study showing that alcohol impairs a wage slave’s performance much less than pot? Or are they just knee-jerking jerks who can’t stand the idea of mild euphoria without a hangover?
¹ Showing the proper reverence here by using uppercase.

Posted by: koreyel | Sep 15 2004 15:46 utc | 6

Koreyel: at least it’s fine to see people seeing the light and calling the current economic system by its real name: capitalist slavery, as opposed to the pre-industrial slavery of old.

Posted by: CluelessJoe | Sep 16 2004 10:29 utc | 7

Back to Main