Barack Obama assures Asia that US borrowing will not spiral out of control

President Barack Obama has promised Asia’s creditor nations that Washington will not let US borrowing spiral out of control, vowing a major drive to cut the budget deficit and restore global confidence in the US dollar.

By Ambrose Evans-Pritchard
Telegraph [UK]
15 Nov 2009

“As the economy recovers, I intend to take serious steps to reduce America’s long-term deficit,” he told the Asia-Pacific Economic Co-operation (APEC) forum in Singapore. “Debt-driven growth cannot fuel America’s long-term prosperity.”

The assurance comes amid growing doubts across the world over the wisdom of White House spending plans. The US Congressional Budget Office expects the deficit to remain around $1.8 trillion (£600bn) as far ahead as 2019 under current plans, pushing the US national debt into the danger zone.

China, Japan, and other Asian states with large holdings of US Treasury debt fear that Washington may be embarking on a course that will lead to “stealth default” through dollar debasement and creeping inflation. The public mood in the US has also been shifting as the Republicans score points with calls for a return to fiscal rectitude.
The US deficit reached $1.42 trillion in the fiscal year of 2009 and it is expected to top $1.5 trillion in 2010, roughly 10pc of GDP.

APEC leaders said the world economy would never be the same again after the financial trauma of the last year. “The post-crisis landscape will be different. We need a fresh model of economic integration. We cannot go back to ‘growth as usual’,” they said.
The group agreed to keep stimulus measures in place, avoiding talk of exit strategies. “Our robust policy responses have helped to set the stage for recovery. But economic recovery is not yet on a solid footing.”

Mr Obama gave warning to Asian exporters that they must stand on their own feet in the future rather than feeding off US markets. “We cannot follow the same policies that led to such imbalanced growth. If we do, we will continue to drift from crisis to crisis, a failed path that has already had devastating consequences,” he said.

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