US Economy

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US Economy
Teresa Nadal
Mind Map by Teresa Nadal, updated more than 1 year ago More Less
Andrew Mbuya
Created by Andrew Mbuya over 8 years ago
Teresa Nadal
Copied by Teresa Nadal over 8 years ago
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Resource summary

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