IMF Says Bush Deficit Could Trigger Global Economic Collapse

From Murdoch's "The Australian" newspaper today:

IMF managing director Rodrigo de Rato said urgent combined international action was required to head off the dangers.

The main cause of concern is the fact the US is running a trade deficit of about $US600 billion ($760 billion) and a budget deficit of about $US430 billion for 2005.

US imports are almost 50per cent greater than the country's exports, with the deficit being financed by international central banks and funds managers.

Despite signs that the deficit is getting bigger, money is pouring into the US from Asia and Europe at such a rate that the US has been able to keep its long-term interest rates steady at 4.2 per cent since the middle of last year.

Dr Henry said the flood of money was "worryingly reminiscent of Federal Reserve chairman Alan Greenspan's warning in 1996 of irrational exuberance in US stocks".

He said that, as with the dotcom bubble in the 1990s, one could not tell how long it would keep going, but it would burst eventually.

The report prompted a response from Aussie PM John Howard, who says such alarmist talk is irresponsible. Of course, the same man said talk of ongoing violence in Iraq for years to come was irresponsible...

What price credibility?