Yoshiko Mori
[Tokyo 30th Reuters]-The US enjoys the policy mix of expanding budget deficit and weakening dollar The United States, the world's largest debtor, attracted foreign capital in the late 1990s through a policy of appreciation of the dollar, gaining stock prices by enriching its economy. However, thanks to the ease of monetary affairs of the Federal Reserve Board (FRB), debt can be issued at a low cost, and there is strong demand from domestic investors for US bonds. It became a possible structure.
This structural change not only loosens US fiscal discipline, but also changes monetary policy.
<Changes in deficit finance and the weak dollar policy>
The US Congressional Budget Office (CBO) said the US budget deficit will increase from $ 779.3 billion in FY2018 (until end of September) to $ 959.9 billion in FY19 and will exceed $ 1 trillion in FY20 The prospect was shown.
Under these circumstances, demand for US bonds by US investors such as US households, pensions, and FRBs is increasing.
According to the US financial circulation account, the overseas sector's finance ratio in the US deficit (balance basis) was high at 51% in 2008, but then gradually declined. -It fell to 36%. Even if the amount of US Treasury bonds issued increases, most of it is consumed without difficulty by domestic investors.
Changes in the structure of US deficit financing have also affected monetary policy.
Takao Hattori, senior global investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said, “The US no longer has to make efforts to attract foreign funds (due to a strong dollar policy) for deficit financing.”
President Trump, who aims to revitalize the US manufacturing industry with a US-first principle, can't help saying that a strong dollar is a disadvantage to the US.
US Secretary of Commerce Ross said on the 19th that he was very offended by the appreciation of the dollar caused by FRB's monetary policy.
US Treasury Secretary Mnushin said yesterday that the US is not willing to intervene in the forex market (dollar selling) at the "current time", but if intervening, it would be more effective if the Ministry of Finance worked with FRB and other countries The possibility of intervention was left, such as showing the opinion that it is.
According to Bank of America Merrill Lynch, if the dollar continues to rise by 10%, the profits of S & P 500 companies will be reduced by 3-4%.
Analysts estimate that 40-50% of their sales are generated overseas. Since Asia and Europe account for the largest proportion, the US is sensitive to the weak yen and the weak euro.
Ironically, however, the more the US intensifies trade wars with other countries, the more fearful money in the world swells to buy dollars in search of a safe haven, and the money returns to the United States. For this reason, the US dollar depreciation policy has not been successful so far.
The dollar index <.DXY>, which indicates the strength of the dollar against the six major currencies, was as low as 73-85 in the early Obama administration (2009-13), but remained high at 88-103 in the Trump administration. ing.
On the other hand, the prolonged trade war has already chilled corporate capital investment and increased the negative impact on the real economy, increasing the probability that the US and the world will fall into recession.
<Inflated budget deficit and warning of former Treasury Secretary Rubin>
The rapid expansion of the US budget deficit should increase long-term interest rates and increase the risk of recession through the expansion of the fiscal risk premium. = RR> is in the 1.4% range, the lowest level in three years, giving the US a margin.
The US debt deficit has increased from 33% of GDP (2000) to 78% due to the accumulation of the US budget deficit, but in the meantime, nothing bad happens (foreign bank). There is a sign that the financial accelerator will be pushed further.
US National Economic Council (NEC) Chairman Kadlow is considering tax cuts to support long-term economic growth on the 22nd, and may be introduced during the next presidential campaign There was.
However, Robert Rubin, NEC's first chairman and former finance minister, contributed to the Washington Post on the 14th that there was no financial crisis in the United States. It is only because there is.
Coincidentally, 1) private capital investment is sluggish, and there is no competition between the private sector and the government sector. 2) The FRB provides ample liquidity through non-traditional monetary easing. 3) The financial market tends to ignore the unsustainable financial situation over the long term.
Mr. Rubin cited the long-term US interest rate rose in 1990 as a result of the expansion of the fiscal deficit, and the next year he fell into a recession. “Just because we have the ability to borrow from foreign countries in our own currency.” "We can't eliminate these risks," he said.
(Editing and graphing Miwa Sasaki)