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Dollar dilemma as greenback value falls (5)

By Chen Jia (China Daily)

08:31, February 25, 2013

The rush by China and Japan in adding to their US debt came just before an agreement achieved by the Democrats and Republicans in January aimed at sharply cutting the budget deficit, known as the "fiscal cliff".

The two US parties agreed to cut about $85 billion of spending starting on March 1, which is expected to hit various US governmental departments this year.

The US Congressional Budget Office said on Feb 5 the US budget deficit will drop below $1 trillion this year.

The office predicted that the fiscal tightening may slow economic growth to 1.4 percent by the end of this year, causing the unemployment rate to edge higher to 8 percent by then, compared with the current 7.9 percent.

As deficit reduction is seen as the prescription to curb crisis spreading from fiscal dilemma, it may push the US government to make more efforts to sell US-made goods abroad and expand its domestic manufacturing industries, as well as create private sector jobs for economic recovery, other than tolerating the unconstrained growth of debt, analysts said.

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Email|Print|Comments(Editor:HuangBeibei、Liang Jun)

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