Actually, the real deal is the Current Account of the US not the balance of payments. Essentially, this represents the total monetary flow into or out of the US. The deficit in the CA has been growing 5-10% per quarter since 1995 dependining upon which measure is used. Quite simply, other countires have been paying for our robust economy by sendng their money here. The latest report I have indicates the deficit in the CA to be about $90bn in 99Q3.

The Fed is really on the horns of a dilema in that it can take no action that would drive capital out of the US leading to a recession nor can it avoid taking action to sop up the excess capital it created and funds imported. My GUESS is that they want to see some inflation in something "beyond their control" since there is no other way to inflate US costs except to significantly raise interest rates which it does not want to do. Higher oil prices would do this neatly.

My further GUESS is that the Fed would like to see around $35 oil. his is high enough to cause some pain in many sectors but not so high tht it would lead to a recession. However, I GUESS that this would be too low. I think a pump price for regular of $1.75 in the east and $2.75 in the west would be needed. Two dollar gas was seen last year in California so it would not shock people but would suck uo a lot of dollars.

Furhter, the added costs would be repatriated taking money out of the system. This of course leads to gold and I'm not qualified to comment on that.

Definition of the Current Account

< a href=wysiwyg://26/htpp://www.dismal.com/ecomony/releases/current.asp>Latest CA Data

Hope the links work. If not -- sorry.

Todd

-- Todd Detzel (detzel@jps.net), January 20, 2000

Answers

See the second link did not do it.

L atest CA data

Hope this works.

Todd

-- Todd Detzel (detzel@jps.net), January 20, 2000.

Try this

-- Possible Impact (posim@hotmail.com), January 20, 2000.

Yes, they will want inflation, but they will want to keep the CPI figures low to save the .gov money on cost of living increases for Soc. Sec. and fed pensions. I don't know how much longer they can maintain this illusion. Increase in oil prices hits food fast because of costs of shipping. Maybe they can force the price of gold down to $150/oz so the nightly news can continue to say there's no inflation.

Inflation kicks people into higher tax brackets fast. .gov likes that.

But let's theorize: Say IRS has hit the wall. (Where *are* my tax forms BTW?) #1 issue for year 2000 elections is where are everybody's refunds? Dollars flooding back into the US from foreign sources before they become worthless. Everybody spending before prices go up further. People with no income because of job loss spend savings staying alive. Congress scraps income tax and immediately puts in place a national sales tax. What a wonderful thing to have in a no-saving, all spending, inflationary environment. .gov would love it.

-- JIT (justintime@rightnow.net), January 20, 2000.

JIT,
"Congress scraps income tax and immediately puts in place a national sales tax. What a wonderful thing to have in a no-saving, all spending, inflationary environment. .gov would love it."

Wow, this is a very interesting insight, any links or further thoughts would be appreciated.

-- Possible Impact (posim@hotmail.com), January 20, 2000.

Anyone seen contingency plans for the National VAT?

-- INever (Inevercheckmy@onebox.com), January 21, 2000.

Sorry Posim, only idle speculation on my part. Not based on any inside information.

-- JIT (justintime@rightnow.net), January 21, 2000.