Is this Black hole a metaphor , or is it mathematically exact analogy ?
CB
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__The current account deficit -- the broadest measure of the U.S. trade gap
-- hit yet another record high last quarter. But there is little evidence
so far that it is hurting the U.S. economy or the dollar, according to The
Wall Street Journal (page A2). The Labor Department said that over-all
import prices climbed 0.2 percent in August, after remaining unchanged in
July. The price of petroleum imports rose a moderate 0.6 percent in August,
after dropping 1.6 percent in July and soaring 10.6 percent in June.
__Lurking in the middle of an otherwise perfect American economy is a black
hole in the form of an enormous trade deficit -- more than $400 billion (4
percent of the gross domestic product) and still rising, as the Commerce
Department reports. In astrophysics, a black hole sucks everything,
including light, into them, and nothing ever gets out. Everyone -- from Fed
Chairman Alan Greenspan to public and private analysts in the rest of the
world -- worries that, like a real black hole, the trade deficit will cause
America's current economic success to simply disappear. In fact, Congress
is so worried that it established a U.S. Trade Deficit Review Commission to
investigate the dangers and how they might be avoided. The commission
>>> [EMAIL PROTECTED] 09/18/00 03:33PM >>>
BLS DAILY REPORT, THURSDAY, SEPTEMBER 14, 2000:
Today's News Release: "Producer Price Indexes -- August 2000", indicates
that the Producer Price Index for Finished Goods decreased 0.2 percent in
August, seasonally adjusted. This index showed no change in July and
increased 0.6 percent in June. The index for finished goods other than
foods and energy edged up 0.1 percent in August, the same rate as in July.
Prices received by manufacturers of intermediate goods fell 0.2 percent,
following a 0.2 percent advance a month earlier. The crude goods index
decreased 1.5 percent, after falling 1.1 percent in July.
With little fanfare, the workplace has become a safer place to be, writes
Alan B. Krueger, Bendheim Professor of Economics and Public Affairs at
Princeton University, writing the "Economic Scene" in The New York Times
(page C2). Since 1992, the number of work-related injuries and illnesses
has fallen 25 percent, to 6.7 per 100 full-time workers from 8.9. This
unexpected improvement translates to at least a $125 billion annual lift for
the economy. The decline in injuries is remarkable because it reverses a
historical pattern discovered by Robert S. Smith of Cornell in 1972:
Injuries usually rise when unemployment falls because work intensity
increases and many inexperienced workers are hired. Yet the tightest labor
market in a generation has coincided with the lowest work-related injury and
illness rate since the Bureau of Labor Statistics started tracking it. The
decline does not appear to be a mere reporting phenomenon. Although studies
have found that employers tend to under report injuries about 10 percent,
the under reporting appears constant over time. Also, the Bureau of Labor
Statistics' Census of Fatal Occupational Injuries -- which are unlikely to
be underreported -- indicates a 13 percent drop in the fatality rate since
1992. In response to escalating costs, some states tightened eligibility
standards for benefits and restricted employees' choice of medical providers
in the 1990's. But a new study by Leslie Boden of Boston University and
John Ruser of the Bureau of Labor Statistics suggests that only a small
share of the decline in injuries and illnesses can be traced to these
factors. Probably a more important effect of ballooning workers'
compensation insurance costs is that many managers recognized that
occupational injuries had a significant effect on the bottom line. Instead
of viewing injury costs as unavoidable, they developed safety programs to
cut risks. The 1990's investment boom in new and safety plants and
equipment probably abetted this effort.
The United States current account deficit the broadest measure of foreign
trade, widened to a record in the second quarter as imports outpaced
exports, the Commerce Department says. The deficit rose 4.6 percent, to
$106.14 billion in the second quarter, surpassing the earlier record of
$101.51 billion set in the previous quarter. The widening was driven
primarily by a rise in the deficit for goods. Earlier, the Labor Department
said import prices in August rose a modest 0.2 percent (The New York Times,
in a Reuters dispatch, page C2).
__The current account deficit -- the broadest measure of the U.S. trade gap
-- hit yet another record high last quarter. But there is little evidence
so far that it is hurting the U.S. economy or the dollar, according to The
Wall Street Journal (page A2). The Labor Department said that over-all
import prices climbed 0.2 percent in August, after remaining unchanged in
July. The price of petroleum imports rose a moderate 0.6 percent in August,
after dropping 1.6 percent in July and soaring 10.6 percent in June.
__Lurking in the middle of an otherwise perfect American economy is a black
hole in the form of an enormous trade deficit -- more than $400 billion (4
percent of the gross domestic product) and still rising, as the Commerce
Department reports. In astrophysics, a black hole sucks everything,
including light, into them, and nothing ever gets out. Everyone -- from Fed
Chairman Alan Greenspan to public and private analysts in the rest of the
world -- worries that, like a real black hole, the trade deficit will cause
America's current economic success to simply disappear. In fact, Congress
is so worried that it established a U.S. Trade Deficit Review Commission to
investigate the dangers and how they might be avoided. The commission -- I
am one of the 12 members -- is to report shortly before this fall's
presidential election, writes Lester C. Thurow, a professor and former dean
of MIT's Sloan School of Management in USA Today (page 27A). For all of the
worry, though, the U.S. has been running trade deficits for more than 20
years without being sucked into a black hole -- and could for another 20
years. The sequence of how the trade deficit would destroy America's
current prosperity is well known. Foreign lenders who feared a future
decline in the value of the dollar would decide to withdraw their funds from
the U.S. In addition to U.S. investors, average American consumers would
see large increases in the prices of imported goods. The drop in purchasing
power would be compounded by a direct fall in Americans' dollar earnings.
Unemployment would skyrocket, because the Fed would have to raise interest
rates to levels so high that they would induce a sharp U.S. recession.
Could it happen? If you're an optimist, the answer is "no". Pessimists
point out that a constant trade deficit requires ever-larger flows of funds
from abroad. Eventually, the sums that have to be paid simply are larger
than the sums that the rest of the world is willing to invest in the U.S.
The bottom line is uncertainty. No one knows whether the financial black
hole actually exists.
