But jumped on Monday and Tuesday, driven by a stronger economic outlook in Europe and Japan and the prospect
of larger fiscal deficits in the U.S. after Congress decided to defer considering entitlement and welfare cuts.
Indeed, for some time the «twin deficits» view held that
large fiscal deficits in the United States were causing large U.S. current account deficits.
Taken to its natural conclusion, this logic dictates that we shut down the oil sands, abandon our resource wealth, have high and variable inflation,
run large fiscal deficits and diminish our financial sector.
The IMF also estimates that consumer prices will climb by an astronomical 13,000 percent this year due to the monetary financing
of large fiscal deficits and the loss of confidence in the country's currency.
Since inflation is the foreseeable result of developed nations «saddled with large indebtedness relative to income (i.e., GDP) and
large fiscal deficits,» today's paltry yields are bound to generate negative real return, Malkiel argued.
So
they larger our fiscal deficit, the larger we should expect the capital surplus.