There is no gas shortage... (2 Viewers)

[Bayouboy]

Blame everything on our trade deficits. Until we take in more than we dole out, expect bad things (fiscally speaking) to occur in the US.

When was the last year we were in the black????? The 60's???

 

[superchuck500]

Blame everything on our trade deficits. Until we take in more than we dole out, expect bad things (fiscally speaking) to occur in the US.

When was the last year we were in the black????? The 60's???

But the weak dollar has actually been a significant boost for our exports.

So this just demonstrates how complex it is. The trade deficit is a problem. The weak dollar is a problem. The trade deficit is actually reduced by a weak dollar.

Note however, that this is a theoretical point. Though our exports have been helped signficantly by the weak dollar, our imports continue to grow and grow.

US trade deficit jumps despite weak dollar
Apr 10, 2008

WASHINGTON (AFP) — The weak dollar failed to improve the US trade picture as the deficit rose to 62.3 billion dollars in February from 59 billion a month earlier, the Commerce Department said Thursday.

The report showed a bulging trade deficit worse than the 57.4 billion dollars expected by Wall Street analysts and marking the biggest since last November.

The rise in the deficit comes from a jump in imports which was stronger than the increase in exports.

AFP: US trade deficit jumps despite weak dollar

 

[blackadder]

Blame everything on our trade deficits. Until we take in more than we dole out, expect bad things (fiscally speaking) to occur in the US.

When was the last year we were in the black????? The 60's???

But the trade deficits in and of themselves are just a reflection of the combination of globalized production, runway spending and lack of savings.

We have shipped off manufacturing to other countries. In most cases even when we buy what is on the surface and American branded product it is assembled overseas it registers as an import on our trade balance.

In a strict technical sense many economists attribuite the bulk of our trade deficits to lack of savings. Since we don't save we consume at a much greater rate than other countries, which means we import more from them than they do from us...

The root of it all is that we simply comsume more than we produce and we have been able to do that due to years of borrowing and easy money.

 

[superchuck500]

The root of it all is that we simply comsume more than we produce and we have been able to do that due to years of borrowing and easy money.

I agree, but that it overly simplistic (as I'm sure you'd concede).

Part of the equation is that we willingly consume products from external sources because its cheaper that way. China is the perfect example of this. We could actually make most of the things we buy from China. But it isn't economical.

For a fascinating look at the economic relationship between the U.S. and China, read this article (I swear I'm not working for Atlantic, the two cites are a total coincidence).

Any economist will say that Americans have been living better than they should—which is by definition the case when a nation’s total consumption is greater than its total production, as America’s now is. Economists will also point out that, despite the glitter of China’s big cities and the rise of its billionaire class, China’s people have been living far worse than they could. That’s what it means when a nation consumes only half of what it produces, as China does.

Neither government likes to draw attention to this arrangement, because it has been so convenient on both sides. For China, it has helped the regime guide development in the way it would like—and keep the domestic economy’s growth rate from crossing the thin line that separates “unbelievably fast” from “uncontrollably inflationary.” For America, it has meant cheaper iPods, lower interest rates, reduced mortgage payments, a lighter tax burden. But because of political tensions in both countries, and because of the huge and growing size of the imbalance, the arrangement now shows signs of cracking apart.

Full Article - strongly recommended if this interests you-
The $1.4 Trillion Question

 

[Bayouboy]

True dat blackadder......and if we stop consumer spending at our current rate, our economy will suffer! Boy this is complex stuff!

On WWL, an economist said we are outspending our means by a gross margin. This country has turned into a "I gotta have it now" society and folks aren't scared to go into the red for it. I understand going into debt for a house....or even a car, but some folks are living it up on vacations, luxuries, etc. when they ain't got a pot to pee in!

Take a look around. When you think "Geeez, how does my neighbor afford XYZ?"????? Well, more than likely.....he can't afford it!!!!

 

[SWJJ]

I agree, but that it overly simplistic (as I'm sure you'd concede).

Part of the equation is that we willingly consume products from external sources because its cheaper that way. China is the perfect example of this. We could actually make most of the things we buy from China. But it isn't economical.

For a fascinating look at the economic relationship between the U.S. and China, read this article (I swear I'm not working for Atlantic, the two cites are a total coincidence).


Full Article - strongly recommended if this interests you-
The $1.4 Trillion Question

but thats the results of free trade policies (IE with China) If tariffs were placed on these goods the price would be/would have been when we still had manufacturing more on par with the prices of products made domestically.

Now that we have moved into NAFTA we are multiplying the effects from the Chinese free trade policy.

So we get cheaper goods so comsumer americans can buy more and feel like the economy is going better than it is.

But we are addicted to cheap imports, if Free trade with China, and Nafta ended tomorrow, it would cripple the economy.

 

[superchuck500]

But we are addicted to cheap imports, if Free trade with China, and Nafta ended tomorrow, it would cripple the economy.

Fully agree. But it would cripple those on the other side as well. That's an inherent reality of globalized trade. Over time, dependencies build up. But proponents of the idea the globalization increases likelihood of peace will argue that the interdependency will cause nations to have to work to resolve economic crises together.

 

[Rickboy]

but thats the results of free trade policies (IE with China) If tariffs were placed on these goods the price would be/would have been when we still had manufacturing more on par with the prices of products made domestically.

Now that we have moved into NAFTA we are multiplying the effects from the Chinese free trade policy.

So we get cheaper goods so comsumer americans can buy more and feel like the economy is going better than it is.

But we are addicted to cheap imports, if Free trade with China, and Nafta ended tomorrow, it would cripple the economy.

We don't have a free trade agreement with China. They simply have regular trade that every other nation has with use (except those that DO have a trade agreement).

NAFTA is strictly for trade between the US, Canada, and Mexico.

The reason China can produce goods so cheaply is because their labor rates border on slavery (and sometimes it is just flat out slavery) and they have very few regulatory controls (when compared to most western countries)

However you are right in that we are addicted. There is no going back. But that also hurts China. They are dependent on us buying their goods. If we killed trade with China it would drive up inflation for a few years. However China's economy would be wrecked almost instantly. I'd have to go look it up but I think trade exports to the US make up almost half their entire economy.

 

[blackadder]

Fully agree. But it would cripple those on the other side as well. That's an inherent reality of globalized trade. Over time, dependencies build up. But proponents of the idea the globalization increases likelihood of peace will argue that the interdependency will cause nations to have to work to resolve economic crises together.

They were saying the same thing at the turn of the century. The major participants in WW I were all trading with each other. Germany and the UK were each the largest trading partner of the other (or near the top), for example.

War between them was therefore supposed to be impossible.

I remember pulling old articles from the Economist from the first decade of the 20th century trumpeting how economic interdependence was changing the world.

Interdependence makes nations think twice, but in the long run it is not a guarantee that at some point tension and discord cause the system to break down.

 

[blackadder]

I agree, but that it overly simplistic (as I'm sure you'd concede).

Part of the equation is that we willingly consume products from external sources because its cheaper that way. China is the perfect example of this. We could actually make most of the things we buy from China. But it isn't economical.

For a fascinating look at the economic relationship between the U.S. and China, read this article (I swear I'm not working for Atlantic, the two cites are a total coincidence).


Full Article - strongly recommended if this interests you-
The $1.4 Trillion Question

Is it really simplisitic?

I'm not arguing the economic efficiency of offshoring production, lowering costs, etc.

I'm more getting at the scale of consumption financed on debt and easy credit -- and the erosion of savings:

http://www.breitbart.com/article.php?id=d8ff6d700&show_article=1

http://www.msnbc.msn.com/id/11098797/

That is more of a problem than globalization. But when it is combined with globalization it builds up enormous financial imbalances in the international financial system and undermines your own freedom of action.

When you put on top of that the fact that the biggest borrower who is very dependent on credit likes to lecture and preach to the countries that lend to it and sustain its consumption, you can foresee the possibility of some tense scenarios of conflict developing in the future.

 

[superchuck500]

They were saying the same thing at the turn of the century. The major participants in WW I were all trading with each other. Germany and the UK were each the largest trading partner of the other (or near the top), for example.

War between them was therefore supposed to be impossible.

I remember pulling old articles from the Economist from the first decade of the 20th century trumpeting how economic interdependence was changing the world.

Interdependence makes nations think twice, but in the long run it is not a guarantee that at some point tension and discord cause the system to break down.

Those were the same people who said Titanic was unsinkable. Perhaps they were prone to unrealistic generalizations.

Of course there are no guarantees. That's why I said "increases the likelihood of peace" and not "guarantees peace."