The solution of US economy is a tax increase
As the Bretton Woods system of fixed exchange rates was collapsing in 1971, John Connally, the US treasury secretary, famously said: “The dollar is our currency, but it's your problem.” In the intervening three decades many things have changed, and that is one of them. Today, the dollar is an American problem as well. The question is what to do about it, and the answer is that there must be more than just words from John Snow, the current treasury secretary. Fiscal policy must change, the sooner the better.
To understand the source of the problem, and its solution, we can start with the so-called strong dollar policy of the 1990s. Robert Rubin's words did not make the dollar strong, the Clinton administration's economic policies did. Five years ago, the stock market was booming and the federal budget was in surplus. The current account deficit could be explained as reflecting the capital flowing into the US as foreigners saw it as a good place to invest.
In 1999, reducing the current account deficit would have meant making the US a bad place to invest. Over the past five years, that may have happened. Foreign demand for American assets has waned even as the current account deficit has grown. What is surprising is not that the dollar has fallen, but that interest rates have not increased. These tend to go hand in hand.
The mystery can be solved by looking at the behaviour of central banks, especially in Asia. According to the Bank for International Settlements, in 2003 the world's central banks increased dollar reserves by $441bn, or 83 per cent of the US current account deficit. Since euro-area central banks were net sellers of dollar reserves, it is clear that the Japanese and Chinese were buying US treasury bonds. Maybe it is just a coincidence, but the foreign increase in dollar reserves roughly matches the federal government's budget deficit. To put this bluntly, the Japanese and Chinese financed the Bush administration's deficit in 2003. It is worth reflecting on why these Asian governments did this and what the consequences are likely to be. In most countries, foreign exchange reserves are not primarily on the books of the central bank. Instead, they belong to the fiscal authority or even some entirely separate entity. Importantly, these entities publish their balance sheets regularly and are normally required to show the market value of their assets. If they were to become technically insolvent, we would know. We can start to see why governments with large dollar reserves would be concerned about both keeping the dollar from depreciating and ensuring that US treasury bond interest rates do not go up. Both of these would result in capital losses for the entities holding the foreign exchange reserves. Given that these reserves are huge more than $800bn in Japan and more than $500bn in China the potential losses are big, as is the potential embarrassment. A 10 per cent appreciation of the renminbi means a capital loss of $50bn for Chinese authorities. Assuming the duration of their bond portfolio is three to five years, a 2 percentage point increase in US interest rates means another loss of $30bn$50bn. It is hard to see a way for the Asians to get out of this bind without American help. Statements by the treasury secretary will not do the trick. Foreign exchange intervention will be equally ineffective unless it signals that something fundamental has changed.
For traders to stop hammering the dollar, the Bush administration has to provide a credible signal that fiscal policy is going to change very soon. So far, they have only made things worse. The president has said he wants to make his first term tax cuts permanent, provide some further tax cuts for individuals and corporations, and reform social security. Together these measures look likely to raise treasury debt by another $3,000bn or so. Where is this going to come from?
There is a limit to foreigners' willingness to finance American consumption, and the fall in the dollar is the first sign we are reaching it. As difficult as it is for the president to admit, the solution is a tax increase. This will decrease domestic consumption, reducing the current account deficit, reduce the issuance of treasuries, and make the US a good place for long-term investment the way it was in the 1990s. Only then will the dollar stabilise and the risk of a dramatic interest rate increase be reduced.
Americans are usually the first to extol the virtues of capital markets in disciplining policymakers who implement unsustainable fiscal policies. We know from watching the emerging world that when fiscal deficits and current account deficits grow too large, hot money flees a country, driving its currency down and interest rates up.
If the US government does not do something soon, it will experience the fate of Latin American countries and suffer a financial meltdown. Dollar depreciation is just the beginning. The foreign exchange traders are doing reconnaissance for the bond vigilantes. If nothing changes, watch out.
The writer is professor of international economics and finance at Brandeis University and research associate at the National Bureau of Economic Research
hdBy Stefan Wagstyl and Tom Warner in KievAn international row threatened to erupt yesterday over Ukraine's disputed presidential election as Russia acknowledged prime minister Viktor Yanukovich as the winner, while the US and the EU condemned the election as fraudulent and gave their implicit support to Viktor Yushchenko, the opposition candidate.
The reactions came as Mr Yanukovich's supporters claimed victory with the official count showing the prime minister ahead by 49.4 per cent to 46.7 per cent with almost all votes counted.
But, speaking before tens of thousands of followers in central Kiev, Mr Yushchenko condemned the official results as fraudulent and declared himself the winner. He pledged to challenge the election in the courts and urged his supporters to strike and come on to the streets in protest.
The opposition leader claimed 3.1m votes were fraudulently registered and cited examples of polling stations where turnout exceeded 100 per cent.
Last night, political tensions were rising in Kiev as up to 50,000 Yushchenko followers crowded into the city's main square and blocked the principal avenue by pitching tents which they pledged to keep in place until they won.
The pro-Yushchenko Kiev city council and the councils of Lviv and other cities in Mr Yushchenko's heartland of western Ukraine declared him the election winner putting their trust in an exit poll which showed their candidate won by 54 per cent to 43 per cent.
Mr Yushchenko's backers in parliament obtained a special session in the chamber in an effort to review the results.
The election to choose a successor to the authoritarian Leonid Kuchma who has ruled for 10 years is widely seen a key moment in Ukraine's history since independence from the Soviet Union in 1991.
Boris Gryzlov, Russian president Vladimir Putin's special envoy, said he had congratulated Mr Yanukovich. Coming before any final announcements from the election commission or any comments from Mr Yanukovich, Mr Gryzlovs remarks looked like an attempt to reinforce Mr Yanukovich and his supporters in the Ukrainian administration, including Mr Kuchma himself. But the polls were criticised by the US, the European Union and Nato. American Senator Richard Lugar, who was in Ukraine as President George Bush's representative, condemned the vote as a concerted and forceful programme of fraud. Bruce George, head of an Organisation for Security and Cooperation in Europe mission, said: "The second round did not meet a considerable number of (international) commitments for democratic elections." Mr Yanukovich said in a statement yesterday the majority of voters had shown “their preference for my position and programme“. His campaign managers urged Ukrainians to accept the official results saying that any voting infringements had been minor and had not affected the result.
美国经济问题：加税是出路
1971年，保持固定汇率的布雷顿森林体系崩溃。当时任美国财政部长的约翰?康纳利(John Connally)说了一句名言：“美元是我们的货币，却是你们的问题。”在此后30多年间，世界发生了翻天覆地的变化，美元的情况也不例外。如今，美元也变成了美国的问题。如何解决呢？答案就是美国财政部长约翰?斯诺(John Snow)不应该只是空谈。必须改变财政政策，而且越快越好。
要理解这个问题的根源及其解决方案，我们可以先来看90年代所谓的强势美元政策。罗伯特?鲁宾（Robert Rubin, 美国前财政部长）的话并没有使美元走强。使美元走强的是克林顿政府的经济政策。五年前，股票市场一片繁荣，联邦预算盈余。目前之所以有经常账户赤字，可解释为当时有资本涌入美国，因为外国人士把美国看成投资的好地方。
在1999年，降低经常帐户赤字意味着美国投资环境不佳。过去五年来，这一情形可能确已发生。即使经常账户赤字上升了，国外对美国资产的需求却在下降。美元贬值并不令人吃惊，令人吃惊的是利率并未提高。通常情况下，美元贬值和利率提高倾向于同时发生。
要想解开这个谜团，我们可以来看一下各国央行的的行为特征，尤其是亚洲各国的央行。根据国际结算银行（Bank for International Settlements）的报告，2003年，全球央行的美元储备增加了4410亿美元，相当于美国经常账户赤字的83%。由于欧元区各国央行是美元储备的净出售者，因此中国和日本显然在买进美国国债。也许这只是碰巧，但外国美元储备的增量大致相当于美国联邦政府的预算赤字。说白一点，2003年布什政府的赤字是日本和中国在埋单。值得反思的是，这些亚洲政府为什么要这样做？这会有什么后果？在大部分国家，外汇储备主要不反映在央行的账面上，而属于财政管理部门，甚至是其它完全独立的某部门。重要的是，这些部门会定期发布自己的收支平衡表，而且通常还要说明这些资产的市场价值。如果出现技术性破产，我们会看得到。现在，我们就能开始理解：为什么一些美元储备很高的政府有意阻止美元的贬值，并确保美国国债利率不上升，因为这两种情况会对持有外汇的机构造成资本损失。鉴于现在日本的外汇储备超过8000亿美元，中国超过5000亿美元，若有损失，必定是巨大损失，而且会造成巨大的难堪。人民币升值10%会使中国政府承受500亿美元的资本损失。假如中国的美国国债资产组合为三到五年期，那么美国利率上升2%会使中国再损失300亿到500亿美元。没有美国的帮助，亚洲国家很难摆脱这种困境。美国财政部长的声明不抵多少作用。外汇干预方案也同样无效，除非这种干预说明某种根本的变化在发生。
为了让外汇经纪人不再对美元穷追猛打，布什政府必须拿出可信的信号出来，说明财政政策很快就会改变。到目前为止，布什政府只是在使现有状况更糟糕。布什总统已表示要把他第一任期内的减税举措永久化，还要针对个人和企业实行进一步减税，并改革社会安全保障体系。这些措施一旦兑现，会新增3万亿美元财政赤字。这钱从何而来？
外国人为美国的消费埋单终究是有限度的，美元贬值正是这个限度就要达到的早期警报。解决方案就是加税，无论要布什总统承认这一点有多么困难。加税将削减国内消费，降低经常帐户赤字，减少国债的发行，使美国成为一个长期投资的好地方，一如90年代。只有到了那时候，美元才会稳定，利率必须大幅提高的风险才会得到缓解。
美国人最喜欢赞赏的一个观点是，如果决策人制定的财政政策不能持久，资本市场自然会来教训他们。从我们对新兴市场的观察来看，当一个国家的财政赤字和经常帐户赤字过大的时候，热钱就会逃逸出去，使这个国家的货币贬值，利率上升。
如果美国政府不尽快采取行动，它就会经历拉美国家的命运，遭遇金融崩溃。美元贬值才是个开头。外汇经纪人在为警觉的债券交易员进行侦察。如果没有什么改变发生的话，大家要小心。
本文作者系布兰蒂迪斯大学(Brandeis University)国际经济与金融教授，也是全国经济研究局的研究员。
