IMF Outlook 9/02

Julio Huato juliohuato at
Tue Nov 5 09:44:50 MST 2002

The link below is to chapter II (Essays on Trade and Finance) of the IMF's
World Economic Outlook, September 2002.  The first essay is telling.

Somewhat departing from the comforting Lawson Doctrine (don't worry about
trade deficits, they mean that the US is an oasis of prosperity), the
authors are very worried about the huge accumulation of US dollar financial
assets in Continental Europe and East Asia.  Not only in absolute terms, but
even in RELATIVE terms, the imbalances have no historical precedent.  The
tone is, as always, calibrated to bring peace of mind to large wealth owners
(and those who manage their assets), but the subtext is clear: The US dollar
cannot sustain itself in the medium run ("existing imbalances appear
unlikely to be viable over the medium term"). Since the US dollar's fall
within the "medium term" is a given, they toss ideas about how to cushion
the effects.



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