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Distributed: Feb 15, 2011

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Sydney, Feb 15, 2011 (ABN Newswire) - While president Obama's speech on reducing the deficit is an impressive suggestion, it will never actually happen. The US has a long history of strong talk on deficit reduction, but very poor form on real implementation. The US budget deficit this year is expected to be 10.9% of GDP, far worse than the largest economy in the Euro-zone, Germany, where the budget deficit is expected to be 3.7%. While the US may complain about the budget deficits of a few small economies in Europe, it has neglected its own far worse situation. Fed New York President William Dudley further exasperated the outlook for the US dollar with a speech claiming virtually full credit for the current recovery was due to QE2.

Growth is the result of a strong global economy, and increased US consumer activity, and is co-incidental to QE2. The on-going obsession for further bond purchases confirms further weakness for the dollar. Meanwhile China's exports were up 37.7% in January, and despite a small contraction in Q4 in Japan, the economy experienced overall good growth for the year 2010, and is expected to expand again this quarter. The ascendency of Asia continues apace.

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Clifford Bennett
Herston Economics

ABN Newswire
Tel: +61-2-9247-4344
Fax: +61-2-9247-4511

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