[smiley]

$this->bbcode_second_pass_quote('', 'E')ven economists would have predicted that

The technical term is the "J-curve".

[BabyPeanut]

$this->bbcode_second_pass_quote('Jack', 'T')he 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.

[BabyPeanut]

http://business.timesonline.co.uk/artic ... 65,00.html
$this->bbcode_second_pass_quote('', 'J')anuary 13, 2005
Plea by Snow as US deficit hits monthly record
By Gary Duncan, Economics Editor

JOHN SNOW, the US Treasury Secretary, last night renewed demands for Europe and Japan to boost growth to ease global economic imbalances after America’s trade gap surged to a monthly record of $60 billion (£32 billion) in November.

A slump in US exports, blamed on weak demand in key trading partners, combined with a sharp rise in America’s oil imports to trigger the surprise jump in the trade deficit. Wall Street analysts had expected it to decline to $54 billion.

[MonteQuest]

$this->bbcode_second_pass_quote('smiley', '')$this->bbcode_second_pass_quote('', 'E')ven economists would have predicted that

The technical term is the "J-curve".

[BabyPeanut]

The Times article goes on:

[quote]Mr Snow blamed the latest jump in the trade deficit on the relative strength of US growth compared with a disappointing performance by the eurozone and Japan. He said: “We are growing faster than our trading partners and we are creating more disposable income than they are. We need Europe to be more of an engine of growth and we need Japan to be more of an engine of growth.â€

[BabyPeanut]

http://www.wpherald.com/storyview.php?S ... 2908-8114r
$this->bbcode_second_pass_quote('', 'E')ven a weak dollar can't stop the deficit
By Shihoko Goto
UPI Senior Business Correspondent
Published January 13, 2005

...

"Generally, a falling dollar helps U.S. firms...but the consequences of these exchange rate adjustments are very complex," said Peter Morici, an economics professor at the University of Maryland. But he pointed out that the biggest imbalance was with China, and not with the Europeans or the Japanese, and the dollar's exchange rate against the yuan has remained unchanged. Meanwhile, a fixed exchange rate for the yuan keeping the Chinese currency deliberately low against units continues to give a significant advantage to Chinese goods.

"Nothing (President Bush) could do would matter more to the welfare of American families than accomplishing a market-driven regime for currencies," Morici added.

[smiley]

Interesting graph Monte. I'm a bit intrigued by the real dollar concept. Clearly it hasn't been adjusted for inflation. It is also not a weighed basket of currencies like the Finex US dollar index.

So what is it?

[MonteQuest]

$this->bbcode_second_pass_quote('smiley', 'I')nteresting graph Monte. I'm a bit intrigued by the real dollar concept. Clearly it hasn't been adjusted for inflation. It is also not a weighed basket of currencies like the Finex US dollar index.

So what is it?

[The_Virginian]

headlines like this don't even phase me anymore...why am I wrtting this...oh , to show that I have not been duped into complacency just yet...

Riiiight....

[Denny]

As a mature nation, in economic terms, it is not a surprise that the U.S. runs a continuous, and growing, trade deficit. However the rate of increase in the deficit is just huge. The trade deficit in goods has increased by one-third since 2001. The gap in goods trade is over $800 billion for 2003, a massive number. What is worse in some respects is that the surplus in services is diminishing, where it should be growing, as it is in services that mature economies tend to excel and grow In 2001 the services surplus was $64 billion and for 2003 had slipped to $51 billion.

The strange situation for a mature economy like th United States is that there is and has been for some time, a large and fast growing net foreign ownership of U.S. assets, and corresponding income earned on these assets (dividends) and borrowings (interest) which is payable to foreigners. Although the balance of such earnings on capital and borrowings is still in favor of the U.S. it is not so much, only $41 billion in 2003. And, since 1994, the balance of assets ownership has shifted such that foreigners own more U.S. assets than Americans own of foreign assets. This is not characteristic of a mature economy at all. However, it would seem that Americans are relatively smarter investors in foreign assets than foreigners are with U.S. assets, as the U.S. presently enjoys a greater return on its foreign holdings than foreigners enjoy on their larger amount invested in the U.S.

I recall learning in economics years ago that the general trend as a country matures is for the capital payments surplus to shift more positive so the combination of that surplus and the surplus in services equals the goods trade deficit.

It is queer that the U.S. situation has bucked traditional economics for a long time, all the while the U.S. dollar has maintained a good strength, at least until the last year or so.

Will this hold up? I think we should all hope so, for economic stability both within and outside the United States. But, its not sustainable in the long run, the trends have to shift so money flows converge to a balance over time. That is just simple arithmetic. Unless you happen to believe in pyramid schemes.

See U.S. Department of Commerce Intl. Economic Accounts

[uNkNowN ElEmEnt]

Out of money? who cares when you are the biggest dog on the block you can just steal it. Now we know why Wolfowitz was appointed.

$this->bbcode_second_pass_quote('', ' ')Japan and Mexico are preparing to follow the European Union and Canada in imposing extra import duties on U.S. goods after Congress failed to repeal a law that has handed companies such as Timken Co. more than $1 billion in tariffs paid by their competitors.

The Byrd Amendment, first ruled illegal by the World Trade Organization in September 2002, was introduced in 2000 to compensate U.S. industries hurt by foreign goods ``dumped'' at below-market prices. It prompted complaints by a record number of countries at the 10-year-old WTO.

Unless Congress repeals the law, the case may become the most damaging ever at the WTO when the U.S. begins distributing tariffs collected on Canadian lumber, worth $4 billion a year. Japan, the economy most affected by the Byrd Amendment, has the right to impose customs duties worth 125 billion yen ($116 million), the biggest sanctions awarded to Japan in a dispute.

``We have not yet decided when our retaliation measures will be invoked,'' said Kunihiko Kawazu, first counselor at Japan's mission to the WTO in Geneva. ``We have already been authorized to do so at any time, but we will make a judgment taking into account how the discussion in Congress goes on repealing the Byrd Amendment.''

The EU and Canada said yesterday they will impose an extra 15 percent duty on a combined $40 million worth of U.S. imports, including some types of American stationery, clothing, live swine, cigarettes and oysters, beginning May 1.

Choosing Targets

Mexico is deciding which U.S. products will be targeted, said Fernando de Mateo, the country's ambassador to the WTO.

``We're analyzing with what we're going to retaliate,'' he said. ``The problem is not revenge; the problem is you cannot have your cake and eat it. This amendment provides an incentive for producers to say `my neighbor is hurting me.'''

Mexican President Vicente Fox will decide when to apply the sanctions, de Mateo said, adding that he was uncertain about the timing of any decision.

``Japan will move slowly, but ultimately it will move,'' said Lewis Leibowitz, a trade attorney with Hogan & Hartson LLP in Washington and legal counsel to Consuming Industries Trade Action Coalition, an organization lobbying for the Byrd Amendment's repeal that counts Caterpillar Inc., Procter & Gamble Co., Emerson Electric Co. and Nissan North America Inc. among its members.

``Retaliation alone is not going to do this,'' he said. ``If the softwood lumber duties start to get distributed, then retaliation would be huge, but while that's a good reason to repeal, the better reason is that it's a bad law.''

[frankthetank]

The record trade gap for Feb

"The U.S. petroleum deficit widened 8% to $16.4 billion. The U.S. imported 296.9 million barrels of crude oil in February, or 10.6 million barrels per day, compared with 322.8 million or 10.4 million barrels in January.

The average price per barrel of oil rose to $36.85 in February from $35.35 in January. " marketwatch

This can't go on forever, can it?
{fixed URL / Agren}

[BigBear]

No it cannot go on forever--would be unable to go on now except for the fact that oil is traded in U.S. dollars. The Treasury pumps out $1.8 billion a day in new money--this is ridiculous and against all proper concepts of good economics. The U.S. is in a way blackmailing their trading partners and why the U.S. has to keep buying vast quanities of foreign goods to ensure they buy vast quanities of dollars. It is out of control and a change to Euro's for oil purchasing would break the financial back of the U.S. overnight--literally. The U.S. has trapped themselves--outsmarted themselves and now are very vulerable--and we will--those of us in North America especially--all suffer deeply when the wall of weakening U.S. currency falls.

[RonMN]

Just a thought...Like a person who is about to file bankruptcy will go max out their credit cards...do you think the USA could be doing this same thing on a grand scale?

Just a thought.

[nth]

Yes, this is very troubling as the deficit is increasing faster than GDP growth. As long as GDP growth outpaces deficit growth and debt growth, we are okay. But these past few years have not been the case. USD must drop further. Devaluate!

If oil is traded in Euro, then EU needs to buy more USD or else serious consequences and what many people's prediction of US collapse will ring true.

[SidneyTawl]

Busn Sr. negotiated the deal with the Saudi's (opec) in the 80's that oil would be traded in US dollars. In exchange for giving them the corporation that is now Saudi Aramco. I have only heard and read this, I have never seen any "agreement" posted. There must be one.

Is there an "out" for Opec in trading dollars.

Since this is a legal agreement what would the legal ramifications be for SA (opec) to break the agreement.

PS

The trade deficit as frank pointed out is rising. The oil imports were up 10%.

[DantesPeak]

$this->bbcode_second_pass_quote('', 'T')rade Gap Accelerates

The trade deficit has been accelerating at a parabolic rate over the last six months.

The US trade deficit in international goods and services is now increasing at an annualized rate of more than $200 billion per year. The accelerating trade gap is the primary reason that the US economy has been able to maintain its growth and shrug off higher energy prices. In the past few years, foreigners (mostly foreign central banks (FCBs)) have been willing to finance the expansion of the trade deficit.

That deficit however, can no longer continue to be financed by the FCBs. The total deficit is now well beyond the collective resources of all FCBs acting as group. The positive blip of the US$ at the start of the new year, produced by the repatriation of US$ by international US companies to obtain special temporary tax benefits, has almost run its course.

[nth]

$this->bbcode_second_pass_quote('DantesPeak', '')$this->bbcode_second_pass_quote('', 'T')hat deficit however, can no longer continue to be financed by the FCBs. The total deficit is now well beyond the collective resources of all FCBs acting as group.

[frankthetank]

And i take it, that the recent rise in interest rates is to attract foreigners looking for better returns?

Some thoughts

Japan has a lot to lose, considering the amount of debt they hold (over 700billion). They also have large population, small land area, few resources.

And as the dollar devalues against the Euro, oil producers will get less for their money (BMW, Ferraris) and will need oil to increase in price.

[DantesPeak]

Actually they are printing money. That really is the problem we are exporting around the world. However they can not print enough money since the inflationary effects of prior money supply expansion has pushed up commodity prices throughout the world.

The best example for this is China. For China to keep up with not only flow of surplus trade dollars, but speculative investment betting on a revaluation upwards of the renminbi, they are expanding their money supply rapidly. One side effect is inflation, as all that money tries to go somewhere buying things or investing in new production, etc. within China.

China is stubborn and does not want to revalue the renminbi to accomadate the US. So they are experiencing the effects of excessive US demand caused by easy credit. They've pushed the money supply just about as far as it will go before it causes very high inflation.

High inflation through the world stops FCBs from expanding their money supply to pick up all the excess dollars created by the trade deficit.