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WASHINGTON, US (January 9th) – Massive trade and budget deficits in the US threaten the world economy by causing higher interest rates, slowing down economic growth and an unprecedented sell-off of the dollar, the International Monetary Fund has warned. In a grim message to Washington, the IMF argued there was a “substantial” risk the twin […]

WASHINGTON, US (January 9th) – Massive trade and budget deficits in the US threaten the world economy by causing higher interest rates, slowing down economic growth and an unprecedented sell-off of the dollar, the International Monetary Fund has warned.
In a grim message to Washington, the IMF argued there was a “substantial” risk the twin trade and budget deficits could see a plunge in the value of the US dollar, which has already fallen sharply over the past year. The IMF report, issued yesterday, painted a gloomy picture of US public finances, which it said had ballooned under George W. Bush mostly because of a recession and terrorism, but also because of unrestrained spending and a series of massive tax cuts.
The report says the budget deficit of about $US475 billion will not just be a problem for Americans, it will effect the world at large. Combined with a trade deficit running at about $US400 billion, the IMF argued the US’s net financial obligations to the rest of the world could be up to 40 per cent of its total economic output within a few years, “an unprecedented level of external debt for a large industrial country”. (MH) Source: The Australian

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