NEW HAVEN, Connecticut: Pandemic time runs at warp speed. That’s true of the COVID-19 infection rate, as well as the unprecedented scientific efforts under way to find a vaccine.
No country can afford to squander its saving potential – ultimately, the seed-corn of long-term economic growth. That’s true even of the United States, where the laws of economics have often been ignored under the guise of “American exceptionalism.” Expressing these calculations in net terms is no trivial adjustment. Although gross domestic saving in the first quarter of 2020, at 17.8 per cent of national income, was also well below its 45-year norm of 21 per cent from 1960 to 2005, the shortfall was not as severe as that captured by the net measure.That reflects another worrisome development: America’s rapidly ageing and increasingly obsolete stock of productive capital.
With unprecedented pressure on domestic saving likely to magnify America’s need for surplus foreign capital, the current-account deficit should widen sharply.Since 1982, this broad measure of the external balance has recorded deficits averaging 2.7 per cent of GDP; looking ahead, the previous record deficit of 6.3 per cent of GDP in the fourth quarter of 2005 could be eclipsed.
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