The Intangible Economy doesn’t mean an economy that is intangible. It means an economy powered by the value created by intangibles (knowledge, innovation, technology, skills, etc). It can not exist “in the air” but grounded in both physical resources (tangibles) and financial resources.
Now we have the latest deficit projections from the Congressional Budget Office (as reporting in the Wall Street Journal):
As details of President Bush’s new $80 billion request for wars in Iraq and Afghanistan were emerging Tuesday, Congress’s top budget analyst projected $855 billion in deficits for the next decade even without the costs of war and the administration’s Social Security plan.
. . .
The projection, for the years 2006 through 2015, is almost two-thirds smaller than what congressional budget analysts predicted last fall. But the drop is largely due to estimating quirks that required it to exclude future Iraq and Afghanistan war costs and other expenses. Last September, their 10-year deficit estimate was $2.3 trillion.
The CBO now also projects this year’s shortfall will be $368 billion. That was close to the $348 billion deficit for 2005 it forecast last fall. If the estimate proves accurate, it would be the third-largest deficit ever in dollar terms, behind only last year’s $412 billion and the $377 billion gap of 2003.
Besides lacking war costs, the budget office’s deficit estimates also omitted the price tag of Mr. Bush’s goal of revamping Social Security, which could cost $1 trillion to $2 trillion and dominate this year’s legislative agenda. Also left out were the price of extending Mr. Bush’s tax cuts and easing the impact the alternative minimum tax would have on middle-income Americans, which could exceed $2.3 trillion, the report said.
As every economist worth their salt has been saying, this trend is unsustainable. This morning’s Financial Times of London ran a story on how foreign central banks are moving away from the dollar as a reserve:
Central banks are shifting reserves away from the US and towards the eurozone in a move that looks set to deepen the Bush administration’s difficulties in financing its ballooning current account deficit.
In actions likely to undermine the dollar’s value on currency markets, 70 per cent of central bank reserve managers said they had increased their exposure to the euro over the past two years. The majority thought eurozone money and debt markets were as attractive a destination for investment as the US.
A major intangible asset of the United States is our credit rating and the financial power of the dollar. With red ink as far as the eye can see, I would how long this intangible asset will last.