2599534
Description
Mind Map by Andrew Mbuya, updated more than 1 year ago
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Created by Andrew Mbuya
over 9 years ago
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US Economy
- Balance of payment
- Current account
- Difference between exports and imports
- Goods
- Services
- Other income( income from investments)
- Payments to capital
- Interest on loans
- Payments to capital
- Transfers accounts
- International Remittances
- International Remittances
- Difference between exports and imports
- Financial accounts
- Tracks changes in assets and liabilities
- Inward foreign investmnets
- Outward direct investments in foreign countries
- Tracks changes in assets and liabilities
- Capital accounts
- Reserves accumulation
- Foreign assets that central banks owns
- Use to manage forex
- Foreign assets that central banks owns
- Current account
- US consumption
- Growing due to
- Growing population
- Low uNemployment
- Cheaper goods abroad
- Incentivizing consumers to continue to import
- Appetite for energy, oil, which was imported
- Growing population
- Growing due to
- For this high deficit
- US has to be financed by other countries, through exports
- One country following a strong export strategy
- China
- Japan
- Europe
- How?
- They are buying companies in the US
- US is perceived to be a safe country to invest in
- Strong US dollar:
- Exports go down, because it's expensive to the rest of the world
- Imports become relatively cheaper, leading to more importations
- Induces consumption
- Induces consumption
- Imports become relatively cheaper, leading to more importations
- Exports go down, because it's expensive to the rest of the world
- Low interest rate
- Leads to low savings, consumption rises
- Low interest rates Leads to low US loans to foreigners
- Who's buying these assets?
- Central banks
- Sovereign funds
- Why?
- Feel comfortable with the 'safe' asset
- Export led growth: have pressure to appreciate their currencies
- Then they will be less competitive
- So their central banks will start buying US dollars and create demand for foreign currecy thus stopping their currency from appreciating
- So their central banks will start buying US dollars and create demand for foreign currecy thus stopping their currency from appreciating
- Then they will be less competitive
- Feel comfortable with the 'safe' asset
- When these assets are big volume, changes in US dollar affects the values of their holdings
- Thus they become sensitive to these changes
- Thus they become sensitive to these changes
- Central banks
- Who's buying these assets?
- International reserves
- World saves in dollars
- World saves in dollars
- Leads to low savings, consumption rises
- They are buying companies in the US
- Korea
- Japan
- China
- US has to be financed by other countries, through exports
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