In my previous career (that is in May last year) I wrote a brief history of
Before you read it though – read yesterday’s post on things that I stuffed up. The credit risk/interest rate risk. The conclusions to my article from last year seem wrong in several important ways.
I thoroughly enjoyed reading this. You mentioned in a few places that some portion of the U.S. current account deficit is attributable to foreign investors financing home purchases through ABS, CDO, and similar instruments. Do you have any figures that quantify the size of this?
If the excess lending went away over the next few years, would the impact on the deficit be material?
Would you mind if I come at an answer to this over the next couple of weeks?
I do not have a single good answer - but I have thought long and hard about how you might approach this issue.
The short version - the current account deficit has to fall from 6 percent to 2 percent.
The exchange rate should have fixed that by a couple of percent (quantification difficult).
However the US imports a lot of oil - the oil price has gone up a lot - and this has more-than-offset the currency driven improvement in the CAD.
There is a forthcoming post about cherries in winter which is the beginning of my approaching this problem.
As you're providing free information, I don't see how it would be sporting to rush you. :) Thanks for a wonderful blog.
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