TEXT-Greenspan speech to Banco de Mexico conference
Below is the text of Federal Reserve Chairman Alan Greenspan’s speech on Monday to a conference by the Banco de Mexico in Mexico City. Stability and Economic Growth: The Role of the Central Bank International finance presents us with a number of intriguing anomalies, but the one that seems to bedevil monetary policy makers the most as they seek stability and growth (the topic of this conference) is the seemingly endless ability of the United States to finance its current account deficit.
To date, despite a current account deficit exceeding 6 percent of our gross domestic product (GDP), we–or more exactly, the economic entities that comprise the U.S. economy–are experiencing few difficulties in attracting the foreign saving required to finance it, as evidenced by the recent upward pressure on the dollar. The markets are not behaving in the way that some, if not most, analysts anticipated as the U.S. current account deficit rose above its previous high of 3-1/2 percent of GDP recorded in 1986. Of course, deficits that cumulate to ever-increasing net external debt, with its attendant rise in servicing costs, cannot persist indefinitely. At some point investors will balk at further financing.
Such a development would be particularly likely should risk-adjusted rates of return on assets outside the United States rise relative to investment opportunities in the United States. Even if such returns on U.S. assets stay high, the rise of concentration risks in foreign official and private portfolios could still induce investors to slow their accumulation of dollar claims and thereby delimit the size of the financeable U.S. current account deficit. However, the adjustment of the U.S. external balance, when it comes, doubtless will be initiated by the actions both of foreign investors and of U.S. residents. Whatever the triggers for adjustment, the move toward current account balance, in addition to being driven by foreign investors altering their external portfolios, presumably would also reflect actions by U.S. residents to address domestic imbalances. In all instances, a current account balance is essentially the product of a wide-ranging interactive process that reflects the production and allocation of goods, services, and incomes among the residents of a country and those of the rest of the world. The outcome encompasses the full array of domestic and international product and asset prices, including interest rates.
More: today.reuters.com
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Brazil
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How to reach Mexico?
By far the most popular style of transport is independent travel relying on the network of buses of varying quality that criss-cross Central America and Mexico. Bus travel is certainly a very good way to get a feel for the countries you are travelling through. But don't shun the occasional opportunity to take a short flight - the view from above has the benefit of providing a different perspective.
Travelling under your own steam is also very popular and brings with it a freedom to explore that bus travel simply does not allow. We provide details on driving
