U.S. Isn’t Broke, Dollar Won’t Collapse, Capital Economics Says

14:08, 9 April 2013

WASHINGTON. April 9. KAZINFORM - Taking into account total domestic assets and liabilities, the U.S. economy's overall net worth is about 550 percent of gross domestic product in 2011, Paul Ashworth, the chief U.S. economist at Capital Economics, wrote in a research note.

That compares with official figures showing U.S. GDP at close to $15 trillion, while national debt has ballooned to $16.8 trillion after nearly tripling since 2001.

"At first glance it does appear that America is caught in some sort of debt super cycle," Toronto-basedAshworth wrote yesterday. After accounting for increases in domestic asset values "the rise in credit market debt and total financial liabilities does not look particularly egregious."

The U.S. Federal Reserve holds 16 percent of total Treasuries outstanding. China is the biggest foreign holder at 11 percent, followed by Japan at 10 percent.

The U.S. isn't deeply in debt to other nations, according to Ashworth. Taking into account U.S. holdings of foreign bonds and cross-country holdings of other types of assets, net external liabilities are a "fairly modest" 30 percent of GDP, he said in the report.

"Under these circumstances, there is little danger of a collapse in the dollar or a spike in long-term interest rates," he wrote.

The dollar fell 0.3 percent to $1.3048 per euro as of 12:49 p.m. in Tokyo after reaching $1.3068, the least since March 15. Treasury 10-year yields were little changed at 1.75 percent, close to a four-month low.

To contact the reporter on this story: Kevin Buckland in Tokyo at kbuckland1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source: Bloomberg

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