Comments on: U.S. Trade Deficit Plummets

By: TerenceC

TerenceC — Fri, 10 Apr 2009 10:15:06 +0000

The drop in imports was led by a 16.3 percent decrease in imported crude oil ($10 billion), which fell to it’s lowest level since April 2004. If our economy was gaining in strength this number would have been significantly higher since US economic activity and petroleum usage are strongly related. In either case however, the graphs indicate a sickness in the US and global economy that we haven’t seen in decades.

By: Justin Gardner

Justin Gardner — Thu, 09 Apr 2009 23:28:20 +0000

Tully, I've seen graphs, numbers, etc. And we have the biggest trade deficit in the world because we consume more than we can genuinely afford. And that reality is hitting many Americans like a brick in the face right now. The era of easy credit is over, so expect the deficit to continue to drop. Also, I know that trade deficits aren't a bad thing because it helps our dollar, but I don't think that's a good long term strategy for growth. In other words, we can't consume our way into prosperity on the back of endless, shuffling debt. I'm with Warren Buffet on this one.

By: Tully

Tully — Thu, 09 Apr 2009 21:13:50 +0000

Justin–Before calling the shrinking trade deficit a “silver lining” perhaps you should go back and graph historical balance-of-trade trends versus GDP growth and unemployment. Start with, say, the 1920’s. I think you’re in for a very rude shock to your assumptions.

A trade deficit is no more (and no less) than a net INflow of foreign investment capital to a nation. And a trade surplus is a net OUTFLOW of domestic investment capital from a nation. Check out your new graph charting trade deficits/surpluses versus domestic economic conditions and then chew over the concept of “capital flight” before re-visiting the misbegotten public “wisdom” that trade deficits are always or even usually a bad thing.

By: kranky kritter

kranky kritter — Thu, 09 Apr 2009 20:22:02 +0000

Oops, my bad, I missed that little uptick at the end. All I noticed was the previous 7 months of tandem plummeting with a closing gap. The dominant trend looks like these 2 figures tend to run in parallel. If that keeps up, maybe we see an uptick in imports within the next month or two.

By: Justin Gardner

Justin Gardner — Thu, 09 Apr 2009 19:55:44 +0000

Sorry, but the graph clearly states that we’re exporting more ($2 billion) and importing less ($8.2 billion) when looking at it from month to month. What you read was a comparison between this year and the same time last year.

So yes, I bothered to read the graph. :-)

By: kranky kritter

kranky kritter — Thu, 09 Apr 2009 18:45:31 +0000

Actually, if you bother to read the graph, it’s not actually true that we are exporting more and importing less.

Instead, we are exporting less, but importing at even more reduced rate.

IOW, we are selling way less of our own products overseas, and we importing way, way, way less stuff from overseas. Not a happy tale. A tale of overall shrinkage. Notice, for example, that if both numbers reach zero, the trade deficit will have completely vanished. :-)