Wednesday, November 13, 2013

San Francisco Fed President On Rebalancing Economies In China And US

The President and CEO shared his thoughts on how China and the US must rebalance their economy's in the future.  The US economy has depended upon high levels of consumption.  It must increase investment and exports to balance its economy.  China's economy has been focused on exports and investment spending.  It must find ways to increase consumption and lower its dependence on exports and capital spending.

The financial crisis has caused the global economy to grow more slowly.  That has affected the level of exports in China and increased its need to find other sources of economic growth.  The US also faces the same problem.  It is hard to understand how the US can increase its level of exports in a slow growth global economy.  This is especially difficult when trade is so heavily dominated by manufactured products which has been a shrinking part of the US economy.

The speech highlights some of the problems that have motivated China to reform its economy, and it suggests that the US must increase spending on education, physical capital, technology and infrastructure.  Its hard to understand how government spending can be increased in much needed areas in the current political environment that is dominated by reductions in government spending in order to further reduce budget deficits.

No comments:

Post a Comment