The same is true of macro economies. If I buy a widget from a company in Indonesia over a company in the US, it just means that I have extra money to purchase things American made.
However, these recent trade deficit figures have me concerned..............
The U.S. trade deficit unexpectedly widened in June by a record $7.9 billion as imports rose and shipments abroad declined.
The $49.9 billion gap was the biggest since October 2008 and followed a $42 billion shortfall in May, Commerce Department figures showed today in Washington. Exports dropped by the most in more than a year.
Stocks plunged after the report, extending a global slide, on growing concern the recovery worldwide was slowing as a report showed output in China cooled and the leader of the Bank of England said U.K. growth will be weaker than previously forecast. Today’s trade data also signaled the U.S. economy slackened more than currently estimated last quarter.
“We’re going to get less of a boost from exports in the second half,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “It’s consistent with slower global growth.”
Why do trade deficits bother me now? Because it's clear that we have collective demand for goods and services in this country. However, with unemployment hovering around 10%, you have to wonder how it is that none of these goods and services can be produced in this country.
Maybe it's because the costs of production is so high they can't be made in this country.
Just a thought.
More.......
1 comment:
Chronic trade deficit is more a sign of a problem than a problem itself.
As an individual you don't have a chronic net trade deficit. You have a deficit with the grocery store but you have a surplus with your customers. If you are efficient with your grocery purchases and you perform well enough to get paid decently, you hope to have a net trade surplus. Over time that surplus becomes wealth. It is theoretically possible for all members of society to simultaneously have a net surplus. This of course runs counter to the liberal assumption that the economy is a zero sum game. But I digress.
On the other hand, if one consumes resources, yet cannot produce them, they are running a net deficit. An example would be someone who is unemployed but continues to consume. In a modern economy people/countries can switch back and forth from surplus to deficit which helps smooth out the bumps. But when a person/country abuses this feature to go into chronic deficit, it really is a sign that something is wrong.
Our chronic national budget deficit not only enables a chronic trade deficit, it practically requires it! In order to fulfill its promises our government borrows dollars from China. This govt juiced consumption ultimately requires a net surplus of goods to come from China. It it tantamount to the US federal government saying, we need a shitload of toys produced and there ain't no way our unions can get the job done, we need your sweatshops. The government is the entity shipping the jobs overseas more than the private sector. Therin lies the problem exposed by a net trade deficit.
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