U.S. Trade Deficit Hits All-Time High

[Zues]

"Such a huge trade gap undercuts domestic manufacturing and destroys good U.S. jobs," said Richard Trumka, secretary-treasuer of labor's AFL-CIO. "America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs."

Sen. Byron Dorgan, D-N.D., said the new deficit figure showed that "our trade policy is an unbelievable failure that is selling out American jobs and weakening our economy."

http://apnews.myway.com/article/20060210/D8FMBL000.html

NAFTA, CAFTA, GUEST WORKERS and "FREE TRADE" mean SHAFTYA!

[Michael Hardner]

One thing I still haven't figured out is are American industries owned abroad benefitting from this imbalance too ?

[America1]

"Such a huge trade gap undercuts domestic manufacturing and destroys good U.S. jobs," said Richard Trumka, secretary-treasuer of labor's AFL-CIO. "America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs."

Sen. Byron Dorgan, D-N.D., said the new deficit figure showed that "our trade policy is an unbelievable failure that is selling out American jobs and weakening our economy."

http://apnews.myway.com/article/20060210/D8FMBL000.html

NAFTA, CAFTA, GUEST WORKERS and "FREE TRADE" mean SHAFTYA!

wow, a dem and a labor union leader coming out against a republicans presidents budge plan, I can' believe it.

[Zues]

"Such a huge trade gap undercuts domestic manufacturing and destroys good U.S. jobs," said Richard Trumka, secretary-treasuer of labor's AFL-CIO. "America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs."

Sen. Byron Dorgan, D-N.D., said the new deficit figure showed that "our trade policy is an unbelievable failure that is selling out American jobs and weakening our economy."

http://apnews.myway.com/article/20060210/D8FMBL000.html

NAFTA, CAFTA, GUEST WORKERS and "FREE TRADE" mean SHAFTYA!

wow, a dem and a labor union leader coming out against a republicans presidents budge plan, I can' believe it.

Who's the democrat and/or labor leader? Point me to him/her!

[Shady]

The increase in the U.S. trade deficit is due mostly to increased oil imports. Why? Because the American economy is enjoying a very healthy period of growth.

The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005, pushed upward by record imports of oil

Gov't Budget Surplus Hits $21B for Jan

The federal government ran a $21 billion budget surplus last month, the best January showing in four years, as both spending and tax receipts set records for the month.

The Treasury Department said the government spent $209 billion last month, a record amount for January and up 7.9 percent from January Government tax receipts, however, also set a record for the month of $230 billion, up 13.7 percent from January 2005.

The faster growth in receipts than in spending pushed the suplus for the month to $21 billion, more than double the $8.6 billion surplus the government recorded in January 2005. It was the biggest January surplus since $43.7 billion in 2002.

Link

[Zues]

The increase in the U.S. trade deficit is due mostly to increased oil imports. Why? Because the American economy is enjoying a very healthy period of growth.

The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005, pushed upward by record imports of oil

Gov't Budget Surplus Hits $21B for Jan

The federal government ran a $21 billion budget surplus last month, the best January showing in four years, as both spending and tax receipts set records for the month.

The Treasury Department said the government spent $209 billion last month, a record amount for January and up 7.9 percent from January Government tax receipts, however, also set a record for the month of $230 billion, up 13.7 percent from January 2005.

The faster growth in receipts than in spending pushed the suplus for the month to $21 billion, more than double the $8.6 billion surplus the government recorded in January 2005. It was the biggest January surplus since $43.7 billion in 2002.

Link

LOL! Okay... let's see... $21 billion from -$427 billion = -$406 billion!... in the red! And only for this fiscal 2006 year! What should we do with the $5.6 trillion surplus President Bush inherited?

President Bush's 2006 Budget Plan

http://www.afscme.org/action/fy2006.htm

FACT: The United States of America is borrowing $3 billion a day! Every single day! If any citizen lived as the Federal government lives... we'd all have been bankrupted long ago!

[YankAbroad]

There's no such thing as a "trade deficit."

It's a term designed by protectionists to "prove" that the economy is "destroyed" by Americans having their purchasing power increase by purchasing lower cost, higher quality products from outside the country.

[Zues]

There's no such thing as a "trade deficit."

It's a term designed by protectionists to "prove" that the economy is "destroyed" by Americans having their purchasing power increase by purchasing lower cost, higher quality products from outside the country.

C'mon Yank... don't be yanking my chain. Of course there's a trade deficit... it's a term that was coined to mean trade imbalance... simply... we import more goods than we produce and export.

And "protectionist" and "isolationist" are Washington "buzz" words designed to denigrate Americans who KNOW that the "level playing field" is as imaginary and non-existent as the "free market."

[Shady]

we import more goods than we produce and export

It doesn't necessarily mean that more goods are imported then produced, it means the total value of goods imported is greater then the total value of goods exported. And as I've already stated, the article refers to oil as the primary reason. We all know that America imports a great amount of oil. It has to, especially when the economy is strong and growing.

[August1991]

we import more goods than we produce and export

It doesn't necessarily mean that more goods are imported then produced, it means the total value of goods imported is greater then the total value of goods exported. And as I've already stated, the article refers to oil as the primary reason. We all know that America imports a great amount of oil. It has to, especially when the economy is strong and growing.

It is also correct to say that foreigners are lending (and Americans are borrowing) because America represents a good place to invest - particularly when compared to the alternatives.

While I dislike comparisons involving one person and a country of millions, a young child has a trade deficit with the outside world because the child borrows so much. This is a good investment however, as all of us know.

[America1]

"Such a huge trade gap undercuts domestic manufacturing and destroys good U.S. jobs," said Richard Trumka, secretary-treasuer of labor's AFL-CIO. "America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs."

Sen. Byron Dorgan, D-N.D., said the new deficit figure showed that "our trade policy is an unbelievable failure that is selling out American jobs and weakening our economy."

http://apnews.myway.com/article/20060210/D8FMBL000.html

NAFTA, CAFTA, GUEST WORKERS and "FREE TRADE" mean SHAFTYA!

wow, a dem and a labor union leader coming out against a republicans presidents budge plan, I can' believe it.

Who's the democrat and/or labor leader? Point me to him/her!

Are you serious? You [posted the article but here you go,,, "Sen. Byron Dorgan, D-N.D." and "Richard Trumka, secretary-treasuer of labor's AFL-CIO"

[geoffrey]

we import more goods than we produce and export

It doesn't necessarily mean that more goods are imported then produced, it means the total value of goods imported is greater then the total value of goods exported. And as I've already stated, the article refers to oil as the primary reason. We all know that America imports a great amount of oil. It has to, especially when the economy is strong and growing.

Wow, such bullshit from the neo-con right.

A trade deficit is always a major crisis in an open market system. Money is leaving the US, why else do you think their currency is dropping in value. An economy can only be sustained as long as NX are positive or there is a large surplus of investment capital (even though this depletes further with every decrease in net exports).

The ignorance of real factors here amazes me. I personally wouldn't want to live in a nearly declining economy due to plummeting imports.

Economic growth in the US is stiffled by this to the point where capital is invested to maintain the status quo instead of growth, because demand on that capital gets so large.

Whats happening with the US dollar is exactly what lead to the decline of the Pound Sterling as a leading reserve currency in the world. Massive foreign debt and current account debt destroyed the Pound in regards to its reserve status, why do you not think it will happen again under very similiar conditions. Once the US greenback loses this status, this trade deficit of yours becomes a huge issue very fast. Do you not see the Euro making significant gains already in the US in its status as a reserve currency?

From a Canadian perspective, the US does run a sizeable trade deficit with us, which gives us a temporary economic advantage.

I don't advocate protectionist policies, as this will further hurt the current accounts of the US. However, saying there is no problems with more money leaving than coming in defies both common sense and economic theory.

[Toro]

The increase in the U.S. trade deficit is due mostly to increased oil imports. Why? Because the American economy is enjoying a very healthy period of growth.

The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005, pushed upward by record imports of oil

Gov't Budget Surplus Hits $21B for Jan

The federal government ran a $21 billion budget surplus last month, the best January showing in four years, as both spending and tax receipts set records for the month.

The Treasury Department said the government spent $209 billion last month, a record amount for January and up 7.9 percent from January Government tax receipts, however, also set a record for the month of $230 billion, up 13.7 percent from January 2005.

The faster growth in receipts than in spending pushed the suplus for the month to $21 billion, more than double the $8.6 billion surplus the government recorded in January 2005. It was the biggest January surplus since $43.7 billion in 2002.

Link

Shady.

There's a surplus because this month, government revenue is usually higher than government spending due to timing reasons. Bush's own budget forecast is estimating a $427 billion deficit.

[Toro]

While the trade deficit is, what $600-700 billion, interestingly enough, net receipts on those investments is something like -$3 billion. (You can find the exact amount on the Federal Reserve web site). Thus, even though America does have this large deficit, income from net foreign investment is about equal.

[Toro]

Wow, such bullshit from the neo-con right.

A trade deficit is always a major crisis in an open market system. Money is leaving the US, why else do you think their currency is dropping in value. An economy can only be sustained as long as NX are positive or there is a large surplus of investment capital (even though this depletes further with every decrease in net exports).

Really?

I guess all these OECD countries are in a major "crisis" since they run trade deficits

Mexico

USA

Australia

New Zeland

Belgium

Czech Rep

France

Greece

Hungary

Ireland

Italy

Poland

Portugal

Slovakia

Spain

Turkey

UK

http://www.oecd.org/dataoecd/56/0/18625402.pdf

Of course, this sentiment is silly. America has run a trade deficit since 1980. Since then, the economy has doubled.

The ignorance of real factors here amazes me. I personally wouldn't want to live in a nearly declining economy due to plummeting imports.

What plummeting imports? Imports are soaring!

http://www.bea.gov/bea/newsrelarchive/2006/trad1205.pdf

France's trade deficit hit an all-time high last year too.

But in other grim news for France’s economy, its trade deficit hit a record €26.4bn last year, as high oil prices increased the cost of imported energy and buoyant consumers bought more imported products, offsetting an increase in exports.

http://news.ft.com/cms/s/e21de402-9a39-11d...00779e2340.html

Where's the talk about the end of the Euro as a reserve currency?

Economic growth in the US is stiffled by this to the point where capital is invested to maintain the status quo instead of growth, because demand on that capital gets so large.

I haven't got a clue what this means.

Growth is going to be 4-5% this quarter. It grew 3.5% in 2005, 4.2% in 2004, and 2.7% in 2003.

http://www.bea.gov/bea/newsrel/gdpnewsrelease.htm

Whats happening with the US dollar is exactly what lead to the decline of the Pound Sterling as a leading reserve currency in the world. Massive foreign debt and current account debt destroyed the Pound in regards to its reserve status, why do you not think it will happen again under very similiar conditions. Once the US greenback loses this status, this trade deficit of yours becomes a huge issue very fast. Do you not see the Euro making significant gains already in the US in its status as a reserve currency?

Dude, what are you talking about? Sterling ceased to be the primary reserve currency after World War II, when Britain lay in ruins and the country was exhausted.

As for the Euro making gains, well, according to Grant's Interest Rate Observer, the dollar accounts for 65% of global reserves, a few points lower than 5 years ago. The Euro won't become a serious contender to the dollar until the Euro-area starts growing again, and the countries within the Euro stop undermining their own currency themselves by running deficits greater than 3% of GDP, which France, Germany and Italy are all doing now. (Italy is over 6%.)

From a Canadian perspective, the US does run a sizeable trade deficit with us, which gives us a temporary economic advantage.

A mercantilist argument that is not given serious consideration anymore.

One reason why Europe and Japan run a trade surplus with America is because they grow slower. America is growing faster, and thus demand is growing faster in America. Therefore, demand is greater for European goods in America than demand for American goods is in Europe. A trade surplus can be, and is often, a sign of economic weakness, not strength (though that doesn't apply to Canada in this case for other reasons).

I don't advocate protectionist policies, as this will further hurt the current accounts of the US. However, saying there is no problems with more money leaving than coming in defies both common sense and economic theory.

Not necessarily.

By definition, America runs a capital account surplus with the rest of the world - it has to, because, as we know from Macro 101, the capital and current accounts must balance. If America is deemed a more desireable place to invest, and more capital flows into America than flows out, that in and of itself will create a trade deficit.

However, that doesn't mean a trade deficit is good either. I tend to worry about it more than I let on in this argument. Rather, I wanted to point out the flaws in geoffery's arguments.

For a benign view of the trade deficit - one that I do not necessarily subscribe to - read here

http://www.tcsdaily.com/article.aspx?id=021006G

[theloniusfleabag]

Dear Toro,

even though America does have this large deficit, income from net foreign investment is about equal.

This is the major problem. Rather than have this as a 'happenstance', the US is relying on foreign investment as it's 'income', and is increasing spending without raising taxes. Even economic growth in a system like this is partly 'artificial', because you aren't paying the actual cost of what it takes to make it happen (infrastructure, etc), you are deferring payment.

[Toro]

Dear Toro,

even though America does have this large deficit, income from net foreign investment is about equal.

This is the major problem. Rather than have this as a 'happenstance', the US is relying on foreign investment as it's 'income', and is increasing spending without raising taxes. Even economic growth in a system like this is partly 'artificial', because you aren't paying the actual cost of what it takes to make it happen (infrastructure, etc), you are deferring payment.

Its not income. Its investment. Income is the return you derive on the investment.

The problem is that over the past five years, much of this "investment" has come from central banks, primarily the Japanese and Chinese central banks, though to a lesser extent, Taiwan and Korea as well. However, sources of flows changed in 2005 with private investors snapping up corporate debt replacing central bank government debt purchases.

Its debatable whether or not this set-up is artificial. One explanation for this scenario is that there is a "savings glut" elsewhere in the world, i.e. there is "too much" saving to make a safe, profitable investment in the domestic economies, and it has found its way to the United States. I don't know if that's true or not - and frankly, I'm skeptical of it - but it may be an explanation. Thus growth would not be artificial.

Understand that the trade deficit is different from the fiscal deficit (though they are linked in a way). You can replace the term "trade deficit" with "capital surplus" and be just as correct. However, the only phrases you can replace "fiscal deficit" with are phrases such as "tax shortage" or "overspending".

My own belief is that this whole structure has pulled forward consumption from the future, and that economic growth, ceteris paribus, will be slower in the future than it otherwise would have been had it not been for the fiscal deficits and low interest rates.

[theloniusfleabag]

Dear Toro,

Its not income. Its investment. Income is the return you derive on the investment.

The 'income', then is made by the investors, those being foreign holdings. However, the USA is acting as though the investment is 'income', and further it is acting as though it is their 'God-given right' to receive that investment.

Its debatable whether or not this set-up is artificial. One explanation for this scenario is that there is a "savings glut" elsewhere in the world, i.e. there is "too much" saving to make a safe, profitable investment in the domestic economies, and it has found its way to the United States. I don't know if that's true or not - and frankly, I'm skeptical of it - but it may be an explanation. Thus growth would not be artificial.

I would say that a 'glut' isn't the main reason investing domestically abroad is considered 'unsafe'. Mostly political uncertainties drive investors to the safest garage in which to park their money. China is reasonably stable, as is Japan, but the world currency isn't the yen or the euro, (or the mongo or the zloty) it is the greenback. My contention is that; the current fiscal policy, that being spending without taxing (or deferring taxation, which the current US regime seems to think doesn't need to happen) will undermine, over time, the stability of the greenback.

My own belief is that this whole structure has pulled forward consumption from the future, and that economic growth, ceteris paribus, will be slower in the future than it otherwise would have been had it not been for the fiscal deficits and low interest rates

'Pulling consumption from the future' means that they are deferring tax hikes until later...but it seems that this idea has been dismissed as unnecessary.

If the US is not willing to 'take the hit' on the economy, it will eventually take it on the currency. I think that result will be far more detrimental, but they seem to be saying..."Let it ride".

[Toro]

The 'income', then is made by the investors, those being foreign holdings. However, the USA is acting as though the investment is 'income', and further it is acting as though it is their 'God-given right' to receive that investment.

Except that the differential in net investment returns is -$3 billion. (You can find the exact number on the Fed web site.) So, in other words, even though America runs a $725 billion trade deficit, the returns on American assets held by foreigners is only $3 billion more than the foreign investments owned by America. In the grand scheme of things, that ain't a lot.

And that's not because of any "God-given right." Rather, that's foreign investors making such a choice.

Mostly political uncertainties drive investors to the safest garage in which to park their money. China is reasonably stable, as is Japan, but the world currency isn't the yen or the euro, (or the mongo or the zloty) it is the greenback. My contention is that; the current fiscal policy, that being spending without taxing (or deferring taxation, which the current US regime seems to think doesn't need to happen) will undermine, over time, the stability of the greenback.

That's very possible.

Pulling consumption from the future' means that they are deferring tax hikes until later...but it seems that this idea has been dismissed as unnecessary.

Yup.

If the US is not willing to 'take the hit' on the economy, it will eventually take it on the currency. I think that result will be far more detrimental, but they seem to be saying..."Let it ride".

It seems to be.

[theloniusfleabag]

Dear Toro,

that being spending without taxing (or deferring taxation, which the current US regime seems to think doesn't need to happen) will undermine, over time, the stability of the greenback.

That's very possible.

Then with the absence of change as a factor, we have to extrapolate the actions to ends. (August1991 seems to think that current policy 'ad infinitum' is a reasonable expectancy, but I disagree. I think most textbooks would too.)

[Toro]

Then with the absence of change as a factor, we have to extrapolate the actions to ends. (August1991 seems to think that current policy 'ad infinitum' is a reasonable expectancy, but I disagree. I think most textbooks would too.)

We don't know. I tend to believe that it cannot be run indefinitely either, but I may be wrong. I have been so far.

[theloniusfleabag]

Dear Toro,

We don't know. I tend to believe that it cannot be run indefinitely either, but I may be wrong. I have been so far.

I have never read a single economic textbook, but I am willing to bet none of them, in their jumble of formulaic numbers and letters, take into account the 'nth degree'.