The United States and the World Economy. Comparisons with other major industrial countries

- first chart - [ description: ] Bar chart showing ``How economies of other countries compare with US'' Countries listed are Canada, Japan, Britain, France, Italy, and West Germany. SOURCE: THE ECONOCLAST ADVISORY SERVICE

[ text: ] The US is Still The Big Cheese. How economies of other countries compare with US (%).

Despite the shift in economic might, the US is far from being an economic weakling. If the output of the other members of the Group of Seven industrial democracies is added up, it totals only one-fourth more than that of the US, according to Central Intelligence Agency numbers. - second chart -

[ description: ] pie chart showing relative sizes of the economies of the US, Canada, Japan, Britain, France, Italy, and West Germany for the years 1948, 1950, 1970, 1985, and 1987, expressed as %; SOURCE: THE ECONOCLAST ADVISORY SERVICE

[ text: ] . . . But Dominance of Global Economy is Dwindling

The United States emerged from World War II as the dominant economy in the world in terms of industrial strength and technology. By now Europe and Japan are more than recovered from the war damage; they are sharing world economic power with the US. Whereas the US economy was 20 times as large as that of Japan in 1950, it is now not quite twice as large. West Germany was smaller by a factor of nearly 12 in 1950; today that has been reduced to a factor of about 4. - third chart - Foreigners Are Buying More Assets in the US

Financial Assets Foreigners Hold in US

($ billions)

End of 3rd Year-end 1982 1983 1984 1985 1986 1987 Quarter 1988 Total financial assets

of foreigners in US 423.9 493.6 582.3 714.6 923.9 1060.0 1186.0 US gov't securities 161.1 176.8 205.6 229.9 275.3 316.0 364.9 US corporate bonds 41.0 45.5 60.4 97.1 137.3 157.6 171.2 Direct investment in US 124.7 137.1 164.6 184.6 220.4 261.9 294.6 Other 321.2 381.9 457.3 571.2 756.6 851.8 960.6 Source: Federal Reserve Board, Flow-of-Funds

Foreigners are using the extra dollars they earn as a result of the US trade deficit to buy American financial assets, both those issued by the government and by businesses. They also are purchasing or building plants, equipment, and real estate (direct investment) in the US. - fourth chart - Corporate Tax Rates Declining . . .

[ description: ] Corporate tax rates for the US, Canada, Japan, Britain, France, Italy, and West Germany for 1985 and 1989 Source: Donaldson, Lufkin & Jenrette and National Tax Journal, September 1987

[ text: ]

Reaganomics, with its emphasis on stronger economic incentives, had an influence on the world. One related trend is lower corporate taxes.

Many industrial nations have also decided to cut tax rates to encourage work. The top marginal rate is the highest tax rate an individual is charged. The lowest marginal rate is the rate paid by the poorest taxpayer (some citizens are too poor to pay income taxes). - fifth chart - . . . So Are Personal Income Tax Rates

[ description: ]

Bar chart showing personal income taxes, both lowest and top marginal rates, for Australia, Denmark, France, Germany, Ireland, Italy, Japan, New Zealand, Britain, and the US for both 1985 and ``Post Reform'' Source: Donaldson, Lufkin & Jenrette and National Tax Journal, September 1987 - sixth chart -

[ description: ] International Stock Market Gains in 1988 list of 14 countries (with world average) of the percent change from the end of 1987 in both US dollars and in local currency SOURCE: DRI/MCGRAW-HILL

[ text ]

Prices on most world stock markets rose handsomely last year. With the Federal Reserve System tightening monetary policy in the US and some other national central banks showing restraint, the fate of stock prices this year remains an open question.

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