xcel
11-03-2008, 12:15 PM
The U.S. financial crisis is a symptom, not a cause, of global problems. The U.S. must solve its trade deficit and invest its credit wisely. (http://www.businessweek.com/bwdaily/dnflash/content/nov2008/db2008112_957646.htm?chan=top+news_top+news+index+-+temp_top+story)
http://www.cleanmpg.com/photos/data/501/Chinese_Goods_heading_to_the_US.jpgMichael Mandel – Business Week – Nov. 3, 2008
Ocean going vessel loaded to its capacity with Chinese goods heading towards the US.
When the third quarter gross domestic product report came out on Oct. 30, most of the attention focused on the drop in real consumer spending, the first since 1991. Especially in a Presidential election year, the pain for consumers is the most relevant political fact.
But to know where this crisis is headed over the next year or so, you need to watch a different number: the size of the U.S. trade deficit. In the third quarter, the U.S. had a trade deficit of $707 billion—equal to 5% of GDP at an annual rate. That's smaller than the peak deficit of nearly $800 billion in the third quarter of 2006, but it's still an astonishing sum, especially since every dollar of the trade deficit is another dollar that the rest of the world has to lend the U.S.
Homeowners are staggering under giant mortgages, Wall Street is flat on its back, and the country is in the throes of the greatest credit crunch since the Great Depression—yet America keeps borrowing by the truckload. If this crisis was caused by too much debt, how long can the trade deficit stay so high?
In fact, there are three possible scenarios for the trade deficit, each of which implies a different set of consequences for the U.S. economy and for the global economy:
Business as usual One possibility is that the trade deficit remains high. The rest of the world keeps shipping goods and services to the U.S. while it continues to lend the U.S. the money to pay for the imports.
Global restructuring Alternatively, the trade deficit shrinks because U.S. consumers cut back on imports and the rest of the world has to adjust to a global economy that lacks the U.S.'s customary demand and borrowing.
Innovative growth The final possibility is that the trade deficit shrinks because the U.S. exports more innovative goods and services to the rest of the world. … http://www.businessweek.com/bwdaily/dnflash/content/nov2008/db2008112_957646.htm?chan=top+news_top+news+index+-+temp_top+story
http://www.cleanmpg.com/photos/data/501/01_-_07_Trade_Deficit.jpg
2001 – 2007 US Trade Deficit
http://www.cleanmpg.com/photos/data/501/Chinese_Goods_heading_to_the_US.jpgMichael Mandel – Business Week – Nov. 3, 2008
Ocean going vessel loaded to its capacity with Chinese goods heading towards the US.
When the third quarter gross domestic product report came out on Oct. 30, most of the attention focused on the drop in real consumer spending, the first since 1991. Especially in a Presidential election year, the pain for consumers is the most relevant political fact.
But to know where this crisis is headed over the next year or so, you need to watch a different number: the size of the U.S. trade deficit. In the third quarter, the U.S. had a trade deficit of $707 billion—equal to 5% of GDP at an annual rate. That's smaller than the peak deficit of nearly $800 billion in the third quarter of 2006, but it's still an astonishing sum, especially since every dollar of the trade deficit is another dollar that the rest of the world has to lend the U.S.
Homeowners are staggering under giant mortgages, Wall Street is flat on its back, and the country is in the throes of the greatest credit crunch since the Great Depression—yet America keeps borrowing by the truckload. If this crisis was caused by too much debt, how long can the trade deficit stay so high?
In fact, there are three possible scenarios for the trade deficit, each of which implies a different set of consequences for the U.S. economy and for the global economy:
Business as usual One possibility is that the trade deficit remains high. The rest of the world keeps shipping goods and services to the U.S. while it continues to lend the U.S. the money to pay for the imports.
Global restructuring Alternatively, the trade deficit shrinks because U.S. consumers cut back on imports and the rest of the world has to adjust to a global economy that lacks the U.S.'s customary demand and borrowing.
Innovative growth The final possibility is that the trade deficit shrinks because the U.S. exports more innovative goods and services to the rest of the world. … http://www.businessweek.com/bwdaily/dnflash/content/nov2008/db2008112_957646.htm?chan=top+news_top+news+index+-+temp_top+story
http://www.cleanmpg.com/photos/data/501/01_-_07_Trade_Deficit.jpg
2001 – 2007 US Trade Deficit