The booming US economy is leading the world

The world's central banks are worried about what would happen if the US economy goes into decline. The Bank for International Settlements (BIS), which groups together central bank officials from around the world, warns that a collapse of the US economic boom could bring economic turmoil to the rest of the world.

"One great danger to continued global expansion at present is that the US economy will overheat and that fears of subsequent recession will undermine stock markets, reduce wealth and cut spending," the BIS says in its annual report.

The BIS is worried because consumers and businesses in the United States are accumulating too much debt to finance the consumer boom, and because the US trade deficit is soaring.

Too much debt

"If investors became less willing to hold the rapidly expanding external debt of the United States, a falling dollar might increase nascent inflationary pressures in the United States, even triggering a hard landing," said BIS Chairman Urban Backstrom, head of the Swedish central bank.

His words echoed some of the fears of the US central bank, the Federal Reserve, which recently said it was considering raising interest rates to cool down the US economy.

The BIS admitted that after a year of global financial turmoil, no one could predict whether stability had now returned to the world economy.

"It would be highly imprudent simply to assume that all will be well," Mr Backstrom told his colleagues.

can be found at http://news.bbc.co.uk/hi/english/business/the_economy/newsid_363000/363354.stm

-- Johnny (JLJTM@BELLSOUTH.NET), June 08, 1999

Answers

Too much debt? Man, this country was founfed on debt. Every single US dollar is a Promise to Pay note. Just how much faith can the world have? Just how many times does one accept an IOU before realizing it was never intended on being paid back? Is it any wonder this sort of economy is causing trouble no matter where it goes? Thanks Mr. Nixon, taking the dollar off the gold standard was a super idea. By the way, now that the $ isn't based on gold, where is all the gold? Oh yeah, you guys kept it all... sorry for asking.

-- (workathome@atl.ga), June 08, 1999.

How about that last sentence "It would be highly imprudent simply to assume that all will be well," That is my new y2k motto "It would be highly imprudent simply to assume that all will be well,"

Yeah I like that

-- Johnny (JLJTM@BELLSOUTH.NET), June 08, 1999.

Ah, that Backstrom is just some Swedish doomer. He doesn't understand how amazingly clever our Fed is and how well they'll be able to control the effects of destabilizing events like Y2K... 8-]}

-- Mac (sneak@lurk.hid), June 08, 1999.

Thanks for the article Johnny, this snip:

"The BIS is worried because consumers and businesses in the United States are accumulating too much debt to finance the consumer boom, and because the US trade deficit is soaring. "

blows my mind. For years the Fed and Administration has been encouraging this massive credit bubble to heights never dreamed of and now the BIS thinks there is a problemo.

Ray

-- Ray (ray@totacc.com), June 08, 1999.

Kinda neat how my pulling money out of the bank is gonna collapse the world economy! [g]

-- Brooks (brooksbie@hotmail.com), June 08, 1999.

Forgive me if I'm wrong, but right before the last recession it seems to me that everyone in the world was trying to loan me money.Buy this, spend that,sign here so on and so forth, and then we started hearing reports from Japan. You remember about how much more the Japenese saved than Americans, and then the recession. In relating the intensity of that moment compared to now (without y2k) I'd say they are about the same. Factor in people's true feelings about y2k and I'd say this baby's getting ready to blow!

-- Johnny (JLJTM@BELLSOUTH.NET), June 08, 1999.

Debt, if leveraged properly, can be used to the wise one's advantage. However, spending's oneself into oblivion is another thing.

-- Tim (pixmo@pixelquest.com), June 08, 1999.

Pollys are spending like there's no Y2K.

Doomers are spending like there's no tomorrow after Y2K.

-- Randolph (dinosaur@williams-net.com), June 08, 1999.