[Theo]

Stephen Roach at Morgan Stanely wrote an interesting piece about this.

The Paradox of Trade

My understanding is that as the dollar decreases this gives a boost to our exports and helps our products domestically since imports are now more expensive. However, we've moved all of our manufacturing overseas so there isn't anything left to benefit from the decline in the dollar. Of course, there is still some manunfacturing but not much. Add to that the fact that China's yuan is pegged to the dollar so their products are still priced the same. Its hard to see where this can go except the toilet.

[MonteQuest]

$this->bbcode_second_pass_quote('smiley', 'I')'m surprised by these numbers. I would expect some effect of the cheap dollar. Just some random thoughts.

The currency devaluation has no effect on the trade with Japan and China because they devaluate their currency just as fast.

What is surprising is that the trade gap with Europe reached a new record. The import from Europe to the US should be hurt by the high Euro. perhaps the low dollar is unable to make up for the anti-american sentiment in Europe. From what I see people especially in France and Germany are less inclined to buy US products.

About the J-curve. The dollar has been sliding for well over four years now without affecting the trade deficit. I think that is far too long to attribute it to a delay factor in pricing.

And the measures that are taken to protect the national industry. So far we've seen a number of these measures and they haven't been able to sort any effect. The steel embargo to protect the US steel industry only led to steel shortages on the US markets. Besides the WTO will probably condemn this action, which implies that other countries will take countermeasures.

[nero]

$this->bbcode_second_pass_quote('', 'W')hen the dollar's decline started in 1985 in the run-up to the 1987 market crash, dollar assets held by foreigners were close to zero. This time, they are close to $9,000 billion, one-third of which is held by central banks.

[MonteQuest]

There has never been an asset bubble that hasn't popped. I am amazed at the size of this balloon! America has to start saving money and soon. This is a really good synopsis of the debt burden:


THE DEBT BOMB

[quote]Americans are growing tired and jaded reading debt horror stories. Personal debt, corporate debt, government debt, mortgage debt, unfunded debt. It’s starting to take on a “Cry wolfâ€

[TrueKaiser]

i am glad i have been refuseing to even get one credit card.

[0mar]

Yea, I've been putting all my spare money into Euros for the last year or so.

[ozkrenske]

Omar
I jokingly made an offer to take a 5% pay cut if I can choose what currency I should be paid in. The head systems accountant of finance (who is in the office next to mine for some wierd project related reason) actually said I guess 'someone like you would want to be paid in Euro's'. I said either them or maybe Remimbi. We laughed it off but I am trying to limit my exposure to the US dollar.

He and I have had a few conversations about all this and he seriously thinks having money in China will be good before and up until they appreciate their economy, then switch to the dollar on the way to the euro over the 12 hours following. He believes it will take that period of time for the world to go into severe shock. Of course he also thinks that is hard for someone to arrange. I think his ideas have some merit though.

[diceman99]

Two things:

Can anyone clarify for me the difference between trade, budget and current account deficiets.

Secondly.

Having all Oil trade done on $US. Does'nt that mean when China want to purchase oil of Nigeria or whoever, this means that China has to export more to USA to get the $US to pay for the oil. Since most countries trade in $US the USA gets to print unlimited money. Yes this is called the PetroDollar. But my point is that if Oil prices th US gets to print more money. If the price of oil went down then there would be a problem.

My 2 cents worth.

[diceman99]

Sorry,

That If you dont get the point of the last post I will summarize.

If oil prices went up to $200US per barrel would'nt that be good for the USA as China or whoever would need to get the $US currency to pay for the oil

[nero]

They've already got billions of dollars sitting in the bank. But in terms of needing to export more to the US to get the dollars to buy the oil. What does Nigeria do with all the dollars it receives? (It certainly doesn't buy stuff from America with them) The dollar is the medium of exchange, partly because it is so liquid that it can easily be exchanged for any currency you like on the currency market.

The Chinese take their dollars and buys some oil from the Nigerians.
The Nigerians buys some shirts from the Chinese with those dollars.
The Chinese didn't lose any dollars, they exchanged some shirts for some oil and the US wasn't involved in the transaction.

[MonteQuest]

$this->bbcode_second_pass_quote('diceman99', 'T')wo things:

Can anyone clarify for me the difference between trade, budget and current account deficiets.

[MonteQuest]

$this->bbcode_second_pass_quote('nero', 'T')hey've already got billions of dollars sitting in the bank. But in terms of needing to export more to the US to get the dollars to buy the oil. What does Nigeria do with all the dollars it receives? (It certainly doesn't buy stuff from America with them) The dollar is the medium of exchange, partly because it is so liquid that it can easily be exchanged for any currency you like on the currency market.

The Chinese take their dollars and buys some oil from the Nigerians.
The Nigerians buys some shirts from the Chinese with those dollars.
The Chinese didn't lose any dollars, they exchanged some shirts for some oil and the US wasn't involved in the transaction.

[BabyPeanut]

http://www.forbes.com/business/business ... 55335.html
$this->bbcode_second_pass_quote('', 'A')ssociated Press
U.S. Trade Deficit Surges to All-Time High
01.12.2005, 01:08 PM

America's trade deficit soared to an all-time high of $60.3 billion in November, reflecting record levels for imports of everything from oil and consumer goods to farm products, the government reported Wednesday.

The Commerce Department said the November deficit was up 7.7 percent from an imbalance of $56 billion in October, which had been the previous monthly record. The new record caught private economists by surprise. They had been forecasting a slight narrowing in the November trade gap.

"This caught a lot of us by surprise. We had been anticipating a pull back in the November deficit because of a decline in the price of oil," said Jason Schenker, an economist at Wachovia Bank in Charlotte, N.C.

[marek]

Even economists would have predicted that

The technical term is the "J-curve".

$this->bbcode_second_pass_quote('', 'J') curve: An interesting relationship that exists between the exchange rate for a nation's currency and its balance of trade. In principle, the drop in a nation's exchange rate, or price of currency, makes the currency less expensive to "buy." With "cheaper" currency the price of domestic production is less and the price of foreign stuff is more, causing an increase in exports to other countries and drop in imports coming in from foreign producers. The economy thus moves in the direction away from a trade deficit and toward a trade surplus. However, the first few months after a drop in the exchange rate the balance of trade goes in the other direction, with any existing trade deficit increasing or any trade surplus shrinking. This occurs because the quantities imported and exported don't change in the short run, but the prices do. Because more is paid for the same amount of imported goods and receive less for the same amount of exports, total spending on imports increases, total revenue received from exports declines, and the movement is in the trade deficit direction.

[bruin]

The dollar is doomed, part 1 of Peak Oil:


AP - "The U.S. trade deficit hit an all-time high of $60.3 billion in November as American appetites for foreign oil and even imported food reached record levels."

"We now have the Grand Canyon of trade deficits," said Joel Naroff, head of a Holland, Pa., forecasting firm. "Actually, deficit is really a misnomer. Chasm, gorge, black hole, infinitely deep well all fit the description better."

"A trade deficit of $60 billion a month is a crisis and it needs to be addressed, not ignored," said Sen. Byron Dorgan, D-N.D., who called on Bush to convene an emergency meeting of key government policy-makers.

[marek]

http://www.peakoil.com/modules.php?name ... pic&t=4092

[Jack]

The problem is, we'd have to really tighten our belts for some years to rebuild our industrial base. I suspect that won't happen anytime soon.

[maverickdoc]

You think the trade defict is bad take a look at the national debt http://www.brillig.com/debt_clock/

[MonteQuest]

Here's the US dollar and the US trade deficit since 1980. Right on track until about 2002, then economic theory gets the boot. Remember what I keep saying about the FED not having any control anymore? The data only goes through the second quarter of 2004, but it is easy to update--just draw the red line straight up and the black line straight down.

So, as the dollar declines the trade deficit goes up now? Hmm...

[clv101]

I was watching CNN in my hotel on Monday morning and their economic expert was saying how it would be down to about $51 or $52bn from the previous $55bn.