by Simon 29 Replies latest social current
Ouch !
Things seem to be going really pear shaped and picking up steam:
Pitiful job growth in July, a sagging stock market and now this ... what has gone wrong with the US economy?
Bush may very well be the worst president economics wise since ... well, Bush snr! And it was all going so well under Clinton .
The trade deficit doesn't bother me nearly as much as a $500 billion budget deficit. We're heading fast toward $8 trillion in debt that will be nothing but an anchor around this country in 30 years.
The trade deficit widens and the country has a huge debt.
That's right Mr. Bush! The economy is doing GREAT!
Oh boy, can't wait for John Kerry to get into office and increase taxes on all those people people "making $200,000 and more." Gee, that's going to be fantastic for all of us small businesses.
BTW, what's the unemployment rate in Europe? What about the percentage of people who own their own home?
Seems like Bush and Blair are doing a better job then their counterparts in France, Germany and the rest of western Europe.
And it was all going so well under Clinton
I think that should read >> "and it was all going so well under the internet "bubble" phenomenon, until the last 8 months of the Clinton administration."
by Daniel T. Griswold
Daniel T. Griswold the author of the new Cato study, "America's Record Trade Deficit: A Symbol of Economic Strength."
The U.S. Commerce Department announced today that America's trade deficit in 2000 was the biggest in the history of the world. The difference between what Americans imported and exported last year should reach about $370 billion -- more than $100 billion larger than the previous record deficit set in 1999 and double the 1998 deficit.
Many headlines and quotes from trade skeptics will sound a familiar refrain: "Worst Year Ever for American Trade." "Trade Deficit Costs Jobs." "Trade Gap Undermines Dollar, Threatens Expansion." Should Americans worry about the trade deficit? Or is it a sign of our nation's strong economy? A $2-million federal commission on the trade deficit issued a final report in November that answered yes to both questions.
Economic theory and experience show that trade deficits are driven by levels of national saving and investment in the U.S. economy, not by allegedly unfair trade barriers abroad or by declining industrial competitiveness at home. America's record trade deficit is a symbol of economic strength, reflecting a strong net inflow of foreign investment drawn to America's dynamic economy.
Growing trade deficits signal improving economic conditions, while shrinking deficits often occur in times of economic trouble. During the last 25 years, the U.S. economy has on average grown about a percentage point faster, 3.5 percent vs. 2.6 percent, in years when the trade deficit expanded compared with years when it shrank. The unemployment rate on average fell 0.4 percentage points during years of rising deficits and rose 0.4 points when the deficit shrank. Manufacturing output rose much faster during years of rising trade deficits than during years of shrinking deficits.
America's largest trade deficits in recent decades occurred during economic expansions, its smallest deficits during recessions. It's no coincidence that as the economy shows signs of slowing down, the monthly trade deficit numbers have also begun to shrink with the economy's growth rate. (Those critics who demand that something be done to "fix" the trade deficit should be concerned that they might get what they ask for.)
Critics of trade liberalization often point to the trade deficit as proof that trade destroys jobs. If exports create jobs, they argue, then surely imports mean less domestic production and fewer jobs. In fact, imports and domestic production rise and fall together. Since 1987, manufacturing output in the United States has risen the fastest during years when the volume of imported goods has also risen the fastest. The two years of slowest import growth, 1990 and 1991, were the only two years in which manufacturing output actually fell. The same economic expansion that spurs manufacturing growth also attracts more imports and enlarges the trade deficit.
Another unfounded worry about the trade deficit is that it will saddle future generations with an unsustainable "foreign debt." It is true that foreign investors own about $1.5 trillion more in U.S.-based assets than Americans own in foreign assets abroad. But about half of foreign-owned assets in the United States are not debt but equity--direct investment in factories and real estate and portfolio investment in corporate stock. And the $1.5 trillion in net foreign investment in the United States is only about 16 percent of Gross Domestic Product, and 4 percent of the net wealth of all U.S. households and non-profit organizations. Net payments to finance our foreign "debt" were less than $20 billion in 1999, about one-fifth of one percent of GDP.
Yet another worry is that chronic trade deficits will spook foreign investors and undermine the foreign-exchange value of the U.S. dollar -- sending stock and bond markets and the real economy into a tailspin. The problem with that scenario is that it ignores the fact that trade deficits are linked to a strong, not a weak, dollar. The trade deficit increases the supply of dollars in the global economy, as foreign producers accept more dollars in payment for imports. But in times of economic expansion, the demand for those dollars by foreign investors seeking to buy U.S. assets is even greater. As long as foreign demand for U.S. assets remains strong, the dollar will remain high, and so will the trade deficit.
The best policy is to ignore the trade deficit, however large it may now seem, and concentrate on maintaining a strong and open domestic economy that welcomes foreign investment. As long as investors world-wide see the United States as a safe and profitable haven for their savings, the trade deficit will persist, and Americans will be better off because of it.
Well when ones economy is 60% (yes 60%) dependant on imported energy - and the price of oil hits record highs (44$ pb Brent Crude - 46.50$ pb Middle East Light Sweet) obviously there will be problems. America MUST for its onw security and to get out of the turmoil of Middle East politics - diversify its energy requirements ad resaerch alternatives and tax its gas guzzlers - otheriwse the economy and politics is hostage to the price of oil
Simon, The United States AGAIN??? Really, why ARE you so obsessed with everything here? Why don't you just move over here & run for governor of California when Arnold vacates the position?
Doesn't anything of importance happen in England?
