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Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says

By Bloomberg News

June 1 (Bloomberg) -- Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.”

The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The U.S. needs a higher savings rate and a smaller deficit on the current account, which is the broadest measure of trade, or “another financial crisis triggered by a dollar crisis could be inevitable,” the Chinese academic said.

The U.S. current account deficit fell to $673.3 billion or 4.74 percent of GDP last year from $731.2 billion, or 4.91 percent of GDP, the year earlier.Full Story

The Fall of the Mall

What does a recession look like? Well, here’s one view, as seen through retail sales. The theoretical mall maps below show 27 companies with stores or restaurants in malls across America. (In some cases, these companies own more than one chain of stores.) In the bottom map, the change in the size of the stores is determined by sales in the first quarter of 2009 as compared to the same quarter in the previous year. Color in the bottom map is meant to indicate the depth of the drop — or the height of the rise — in sales. The deeper the red, the steeper the loss.Full Story

Fed Is Been Warned by CHINA

China warns Federal Reserve over 'printing money'
By Ambrose Evans-Pritchard
Last Updated: 1:52PM BST 27 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed's leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending. Full Story