US budget deficit: Use of gold to achieve debt relief

Some the world's major central bankers warned the United States yesterday that the international community could be running out of patience with the massive U.S. &to=http:// english.pravda.ru/economics/2001/10/22/18823.html' target=_blank>budget and trade deficits that have pushed the dollar lower and increased the cost of their exports in America.

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But U.S. &to=http:// english.pravda.ru/comp/2002/08/07/34017.html' target=_blank>Federal Reserve chairman Alan Greenspan, speaking before the official opening of the Group of Seven finance ministers meeting, said factors including the weaker dollar and tougher budget discipline in Congress may restrain the growth of the trade gap.

It is unacceptable for developed countries to run long-term current account deficits, &to=http:// english.pravda.ru/economics/2002/06/08/29979.html' target=_blank>European Central Bank president Jean-Claude Trichet said at a conference of business leaders and government officials, reports Toronto Star.

According to the Business Report, the dollar's slide since 2002 had not yet curbed US imports because overseas firms had been hedging and cutting margins, but Greenspan said that this could not continue indefinitely and that the &to=http:// english.pravda.ru/main/2002/07/22/32962.html' target=_blank>US economy would be able to adjust.

The deficit in the current account, the broadest measure of trade and investment flows, mushroomed to a record $164.7 billion (R1 trillion) in the third quarter of 2004.

Greenspan acknowledged that the global economic environment "has little historical precedent" and was thus hard to predict.

Gold traders will have more to digest from the G7 summit after UK finance minister Gordon Brown failed to secure U.S. backing for plans to use some of the International Monetary Fund's gold reserves to pay third-world debt.

Fears of gold sales pushed bullion prices to their lowest in over three months last week. The U.S. said plans to use IMF gold reserves to fund a debt write-off were unacceptable but G7 finance chiefs still agreed to examine the UK proposals further at their next meeting.

Brown, who hosted the two-day meeting in London, struck an upbeat note. "I believe this is the first time there has been a mention of the use of gold in a G7 communique for achieving debt relief," he said, informs Reuters.

JB

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