MSNBC [Moscow, 1-30-98]

2. MSNBC[Moscow, 1-30-98] • “The central bank said from Monday its refinancing rate would rise to 42 percent, its highest level for nine months and double the 21 percent it had fallen to in October before the Asian crisis engulfed Russian markets.”

3. MSNBC[Moscow, 1-30-98] • “The refinancing rate is the rate at which major banks can borrow overnight money from the central bank, and indicates where the central bank believes the ceiling for Treasury bill yields should be.”

4. MSNBC[Moscow, 1-30-98] • “Raising the refinancing rate lets yields rise to a level where Treasury bills and bonds may again be attractive, and could help staunch the flood of money out of Russia.”

5. Chapter 5:The Balance of Paymentsand InternationalEconomic Linkages

6. Balance of Payments ???

7. Balance of Payments Net value of all economic transactions - including trade in goods and services, transfer payments, loans, and investments - between residents of the same country and those of all other countries.

8. BoP and GDP

9. BOP and GDP – 2008-IVSource: Bureau of Economic Analysis[www.bea.gov]

10. BoP and GDP – 2008-IV[GDP = C + I + G + (X – M)]

12. Top 5 Countries with which the U. S. Trades, 2007-08

13. Top 5 Countries with which the U. S. Trades, 2007-08

14. Top 5 Countries with which the U. S. has a Trade Deficit, 2007-08

15. Top 5 Countries with which the U. S. has a Trade Deficit, 2007-08

16. Top 5 Countries with which the U. S. has a Trade Surplus, 2007-08

17. Top 5 Countries with which the U. S. has a Trade Surplus, 2007-08

18. Balance of Payments Accounts • Current Account • Financial Account • Capital Account • Errors and Omissions • Reserves and Related Items

19. Balance of Payments Accounts • Current Account: (millions) • Goods - 2008: - $821,153 • Services - 2008: + $144,054 • Net Amount - $677,099

20. Balance of Payments Accounts • Financial Account • Direct foreign investment • Portfolio investment • Other capital investment – short-term financial transactions

21. Balance of Payments Accounts • Capital Account: • Debt forgiveness • Assets transferred by people who move from one country to another • Sale of patents and trademarks

22. Balance of Payments Accounts • Double Entry System: • debits offset credits • sum of transactions equals zero • unaccounted for differences are recorded as statistical discrepancy

23. Balance of Payments Accounts • Debit Entries: • purchase of foreign goods, services, or assets • decline in foreign liabilities

24. Balance of Payments Accounts • Credit Entries: • sale of domestic goods, services, or assets • increase in foreign liabilities

25. Balance of Payments Accounts • Current Account • Financial Account • Capital Account • Errors and Omissions • Reserves and Related Items

26. International Account Relationships

32. Americans Are Poor Savers[OECD, 1980-88]

33. “Where Housing Market Goes,So Goes Consumer Spending”-Wall Street Journal Online; 9-27-05 • “Over the past decade, [Greenspan] said, the market value of owner-occupied homes has risen from $8 trillion to $18 trillion, while home-mortgage debt linked to these structures has risen at a somewhat faster rate.”

34. “Where Housing Market Goes,So Goes Consumer Spending”-Wall Street Journal Online; 9-27-05 • “Surveys indicate that approximately a fourth to a third of the value of home equity loans and refinancing cash-outs is directly used for personal consumption expenditures …”

35. “Where Housing Market Goes,So Goes Consumer Spending”-Wall Street Journal Online; 9-27-05 • “[Greenspan] then argued that it is the increase in consumer spending financed by such home-equity extraction – rather than by income or other assets – that is probably responsible for much of the decline in the U. S. personal-savings rate since 1995.”

37. “Where Housing Market Goes,So Goes Consumer Spending”-Wall Street Journal Online; 9-27-05 • “… if mortgage rates rise, or average home prices become increasingly hard to afford, Americans may find it harder to extract cash from refinancing or selling their homes, and the personal saving rate, accordingly, would rise.”

38. “Where Housing Market Goes,So Goes Consumer Spending”-Wall Street Journal Online; 9-27-05 • “Another economic side effect, Mr. Greenspan argued, would be that imports of consumer goods and the materials to make these goods would also decline, subsequently shrinking the U. S. trade deficit.”

39. “7 reasons Americans save so little”-MSN, MoneyCentral, 2/4/2004 • Credit’s easy, and debt carries no stigma • Someone or something will bail me out • False sense of financial security • It’s the tax code, stupid • Don’t believe the stats: people are saving • Carpe diem is the way to live • I’ll work to my grave

40. U. S. Balance on Goods, Services,and Income 1981-2007 ($, Billions)

41. U. S. Balance of Trade, 1954-2008[Goods & Services]

42. How to cope with the trade deficit? • Currency depreciation • Protectionism • End foreign ownership of U. S. assets • Increase the savings rate

43. Should We Devalue the $? • Overvalued currency • tax on exports; subsidy to imports • Weaker currency should reduce deficits • Contrary to U. S. experience • “J-curve” theory

45. Protectionism:Tariffs, Quotas, etc. • Each raises domestic prices and erodes purchasing power • Lower standard of living • Tend to reduce both imports and exports - deficit remains unchanged

46. “Clinton Imposes Tariffs on Steel Imports That Exceed Quota”[New York Times, 2-12-00] • “President Clinton imposed tariffs on steel imports valued at $410 million today, answering pleas from steel makers and labor unions but raising tensions with South Korea, Brazil, Germany, Japan and other major trading partners.”

47. “Clinton Imposes Tariffs on Steel Imports That Exceed Quota”[New York Times, 2-12-00] • “The duties, which take effect immediately, will sharply raise the price of steel imports that exceed a quota pegged at 1998 import levels. The United States says it was flooded with steel imports in 1998 and 1999.”

48. “Clinton Imposes Tariffs on Steel Imports That Exceed Quota”[New York Times, 2-12-00] • “The action places a 10 percent duty on wire rod and a 19 percent surcharge on line pipe, with the duties phased out over three years. The duties will hit only those imports that exceed the 1998 baseline.”

49. “WTO panel rules that U. S. steel duties are illegal”[MSNBC, 7-11-03] • “In a stinging rebuke to the United States, the World Trade Organi-zation ruled Friday that heavy duties on steel imports imposed by the Bush administration violate global trade rules.”

50. “WTO panel rules that U. S. steel duties are illegal”[MSNBC, 7-11-03] • “A three-member panel of trade experts said in a 968-page ruling that the “safeguard” duties of up to 30 percent … were out of line with WTO rules.”