Is America’s Economy Really Too Big to Go Down the Drain?

To most people, the prospect of an American collapse is almost unimaginable. But to Stephen King, managing director of economics at HSBC, it is a very real possibility. In this article, King traces the economic success of the US in the 90s, arguing that this growth was due in large part to other countries which were willing to prop up the US economy. America frequently spent more than it produced and needed foreign loans to fill the gap. Is this model sustainable? The US has run current account deficits in the past, but in those cases, King argues, American recessions worked to reduce its dependency on foreign capital. This time, King says, things are different: “the US may have had a recession but, on this occasion, the recession did nothing to remove America's dependency on the savings being made in other parts of the world.” Responding to those who see no problem with current account deficits, King answers that the “US will only be able to expand so long as the rest of the world is prepared to provide the necessary funds.” The question is - will this relationship continue indefinitely? - YaleGlobal