On Current Account: A Gentler Greenspan?

Federal Reserve Board Chairman Alan Greenspan is sounding a little less concerned about two major deficits that directly affect the growth rate of the U.S. economy and the amount and cost of business borrowing. Market forces, Greenspan said at a London conference on Feb. 4, seemed ready to stabilize and eventually decrease the deficit in the U.S. current account, the broadest measure of the country's international economic standing. In essence, as Merrill Lynch & Co. notes, Greenspan is saying U.S. exports will rise and imports will fall -- as will the amount of financing need to cover the deficit.

What's more, Greenspan reported hearing the sound of a bit more fiscal restraint coming from Washington, D.C. "The voice of fiscal restraint, barely audible a year ago, has at least partially regained volume," he stated. "If actions are taken to reduce federal government dissaving, pressures to borrow from abroad will presumably diminish."

With the White House this week submitting to Congress its proposed federal budget for fiscal year 2006, just how much fiscal discipline exists will soon be apparent.

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