Analysts:
US Economy Could Slow Global Growth
Davos,
Jan. 26
2005 (VOA News) -- While the world economy is
expanding rapidly, some economists are concerned
the U.S. economy could slow global growth as
interest rates rise.
Overall
economic growth may be at its fastest pace in
30 years, but some economic analysts remain
worried.
Stephen
Roach of Morgan Stanley in New York says the
principal problem is the American consumer's
reliance on debt to finance consumption. He
says U.S. consumers are borrowing too heavily
by using the value of their homes to back credit.
"Because
they are spending increasingly, as asset dependent
consumers extracting value from property, which
by the way is clearly entering the stage of
being a bubble, and going deeply into floating-rate
debt to do that,” said Mr. Roach. “The American
consumer is an accident waiting to happen."
Mr.
Roach told a crowded opening session in Davos
that the U.S. government is also spending and
borrowing to heavily. He is doubtful that the
Bush administration will make good on its pledge
to cut the government budget deficit in half
over the next four years.
The
American budget and trade deficits were identified
as the main reason why the dollar has declined
significantly during the past two years.
Tokyo
University Professor Takatoshi Ito suggests
that as the Japanese economy expands the yen
may continue its recent rise against the dollar.
But Mr. Ito does not expect China to end its
fixed currency link to the dollar. China, says
Mr. Ito, will continue to register impressive
economic growth.
"There
is no stopping of this giant getting bigger
and faster,” he noted. “And it reminds you,
probably, of the Japanese economy in the 1950s
and 1960s. The Japanese economy grew at a 10
percent annual rate for 20 years."
China
registered nine percent economic growth in 2004
and that pace is expected to continue this year.
The expert view is that even though world interest
rates are going up, growth will persist in Asia,
the Americas, Europe, and Africa.
- Barry
Wood
- Voice of America in Davos
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