US: paralyzed

The dollar and the Dow have dived. Serious imbalances in the US economy are now evident. The current account deficit is nearing unfinanceable proportions. The US economy could only grow at an above-average, yet disinflationary, pace while the rest of the world remained stagnant. That's no longer the case. Global growth is accelerating. So the dollar is no longer the currency of choice. And a weak dollar is synonymous with rising commodity prices and resurgent inflation. And it's not just the US economy and financial markets that are becoming paralysed. I reckon 2000 will be a year of US foreign economic policy paralysis. At its heart lies the presidential campaign. The impact on international relations could be severe. Those with Russia are already becoming strained. A deal on Chinese World Trade Organization accession may be missed, undermining Zhu Rongji and China's reformists. Trade tensions with the EU will escalate. And no action will be taken to support the dollar.