# Record $68 billion trade deficit in July • News Polly https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html Hello, No. 1...5...0, greetings from No. 14 Your country is going busted and all you can talk about is terrorism? LOL This may well be my last post before I get banned so take it as a last ditch effort for me to warn all of you Americans as a friend. Last edited by a moderator: ## Answers and Replies Staff Emeritus Science Advisor Bush has an unlimited credit card. He and Congress will take their$millions and leave our children and future generations to pay it off.

The Bush approach is borrow and spend.

Yonoz
Polly said:
https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html

Hello, No. 1...5...0, greetings from No. 14

Your country is going busted and all you can talk about is terrorism? LOL

This may well be my last post before I get banned so take it as a last ditch effort for me to warn all of you Americans as a friend.
I wouldn't be so jolly. We're all in the same boat on this one.

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Staff Emeritus
Russia (especially Putin and his buddies) and China are flush with cash. Russia has oil and China has a multi-billion dollar export market to the US and other industrialized nations.

Yonoz
Astronuc said:
Russia (especially Putin and his buddies) and China are flush with cash. Russia has oil and China has a multi-billion dollar export market to the US and other industrialized nations.
Exactly. They all sell their stuff to the US. Bad times in the US=less exports for other countries. That is, until they gain enough buying power - and we're not there yet.

Yonoz said:
Exactly. They all sell their stuff to the US. Bad times in the US=less exports for other countries. That is, until they gain enough buying power - and we're not there yet.
When we get there, which isn't as far off in the future as I once thought, what do you think will happen?

What will America do?

I guess George hasn't thought much about that since it is a problem for the next president.

edward
Skyhunter said:
When we get there, which isn't as far off in the future as I once thought, what do you think will happen?

What will America do?

I guess George hasn't thought much about that since it is a problem for the next president.

Apparently George doesn't even think about the budget deficit either.

Yonoz
Skyhunter said:
When we get there, which isn't as far off in the future as I once thought, what do you think will happen?
I suppose China and India will emerge as the biggest importers. The US market will have to adapt, it will probably do some good - you'll stop making those terrible big cars and do what you do best - iPods and investment firms. And movies.

J77

And the jump from Spain (149) to the US (150)

This stat needs more explaining...

Mentor
Polly said:
This may well be my last post before I get banned so take it as a last ditch effort for me to warn all of you Americans as a friend.
Warn us of what, exactly? What do you think those statistics mean?

Yonoz
J77 said:

And the jump from Spain (149) to the US (150)

This stat needs more explaining...
It's over at https://www.cia.gov/cia/publications/factbook/docs/notesanddefs.html":
This entry records a country's net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments (such as pension funds and worker remittances) to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis, i.e., not in purchasing power parity (PPP) terms.

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Curious6
An interesting article which looks at the relationship between current account deficits and the general performance of the economy as measured by indicators such as the level of unemployment, GDP growth, and manufacturing output:

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=4390 [Broken]

Read the section on causation as well, that clarifies some misunderstandings which might arise as you read through the text.

This, on the other hand, is a more pessimistic overview of the US's increased borrowing to finance its current account deficit:

http://www.epinet.org/content.cfm/Issuebrief203

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Staff Emeritus
Gold Member
Dearly Missed
Curious6 said:
An interesting article which looks at the relationship between current account deficits and the general performance of the economy as measured by indicators such as the level of unemployment, GDP growth, and manufacturing output:

http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=4390 [Broken]

Read the section on causation as well, that clarifies some misunderstandings which might arise as you read through the text.

This, on the other hand, is a more pessimistic overview of the US's increased borrowing to finance its current account deficit:

http://www.epinet.org/content.cfm/Issuebrief203

I read the link and am not impressed. The author's point is that the current account deficit is a particular year does not cause problems for the US economy in that year. He brushes off any longer range effect, and asserts that the deficit is just due to the US economy doing better, so that people have the means to buy more, and they choose to spend that on overseas goods.

But the global and US economies are both complex enought that you wouldn't expect to see an effect of any shock as promptly as the very year in which the shock was incurred. Rather than emphasizing 2004, the author should have considered 2005 and 2006; that's where you'll see the effect, if any, of the 2004 deficit.

And it is indeed the propensity of Americans to prefer foreign products to domestic ones that drives both the current account deficit and the collapse of US manufacturing which is still going on (see the Ford news this week; laying off one-third of their salaried workforce and closing a bunch of plants). Where are all the author's new jobs now?

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Staff Emeritus
If the debt continues to the point that the interest cannot be paid, and someone doesn't get paid, the US economy would basically collapse. It is in a precarious state at the moment, and all it takes is for those purchasing Treasury bonds to stop, and watch what happens.

The US economy has been built on interest accumulation. That is unsustainable, and can only continue to the point of collapse, unless policies are changed now. The longer the wait, the worse the downside will be.

The US may already be in a recession. The housing market has stalled, and we are seeing early signs of increasing unemployment - such as Ford laying-off 10,000 salaried imployees and closing plants.

Ford Targets Thousands of White-Collar, Labor Jobs
http://www.npr.org/templates/story/story.php?storyId=6084182
All Things Considered, September 15, 2006 · Ford Motor Co. announced it will eliminate an additional 10,000 white-collar jobs as it tries to speed up the restructuring plan it announced earlier this year. The struggling automaker will also offer buyouts to all its 75,000 blue-collar workers as it seeks to shut plants and reduce payroll costs.

Curious6
I read the link and am not impressed. The author's point is that the current account deficit is a particular year does not cause problems for the US economy in that year. He brushes off any longer range effect, and asserts that the deficit is just due to the US economy doing better, so that people have the means to buy more, and they choose to spend that on overseas goods.?

I don't agree with the author's viewpoint either; I believe the issue is too complex and far-reaching for it to be simplified into such a trivial analysis. In my opinion, the author creates a false impression of a causation, rather than correlation, relationship between a sound economic position and a large trade deficit (until he clarifies it at the end). I posted this article to stand in contrast to the second I posted; the intention was basically to present a different perspective on the issue.

But the global and US economies are both complex enought that you wouldn't expect to see an effect of any shock as promptly as the very year in which the shock was incurred. Rather than emphasizing 2004, the author should have considered 2005 and 2006; that's where you'll see the effect, if any, of the 2004 deficit.

I believe the consequences of large trade deficits (or for that matter, other economic behaviour) take a longer time to reveal themselves. If there were really just a one- or two-year time lag then the US's economy would be in a dire state by now (excessive current account deficits have been an alarmaing characteristic of the American economy for the past few years). The whole debate focuses on the sustainability of such continuous trade deficits; opinion on the issue is mixed as far as I know.

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Gold Member
Dearly Missed
Curious6 said:
If there were really just a one- or two-year time lag then the US's economy would be in a dire state by now

See my remarks about Ford. Rumor has it that GM won't be far behind; that's an awful lot of people going out of work. We can't go on being richer than China if all our dollars are spent there and aren't replaced.

edward
See my remarks about Ford. Rumor has it that GM won't be far behind; that's an awful lot of people going out of work. We can't go on being richer than China if all our dollars are spent there and aren't replaced.

Ford announced yesterday that they are terminating another 10,000 white collar workers and closing two additional factories. This is in addition to what was previously announced..

edward
Yonoz said:
I suppose China and India will emerge as the biggest importers. The US market will have to adapt, it will probably do some good - you'll stop making those terrible big cars and do what you do best - iPods and investment firms. And movies.

Ipods are made in China. We have been reduced to mostly manufacturing toilet paper and military weaponry.

Yonoz
edward said:
Ipods are made in China. We have been reduced to mostly manufacturing toilet paper and military weaponry.
Yeah but how much does it cost to make an iPod and how much are they sold for?
EDIT: The bulk of the wealth stays in the US. The US workforce needs to adapt somehow.

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edward
Yonoz said:
Yeah but how much does it cost to make an iPod and how much are they sold for?

That point is true for every product made in China. Add it all up and we have one huge trade deficit because of the sheer volume of products made in Asia.

Another problem is that the factories are now there, the technology is now there, and the technology to build factories is now there.

Yonos said:
EDIT: The bulk of the wealth stays in the US. The US workforce needs to adapt somehow.

Whether or not the bulk of the wealth stays here is still very much in question. U.S. companies are moving their headquarters off shore and many U.S. factories are now owned by foreign corporations.

There is no way the U.S. workforce can compete with 17 cent per hour labor. But the problem is much larger. High tech workers are losing jobs as well. Engineers and CAD/CAM designers and operators who have worked in manufacturing are among them.

When the job skills used to design, build and operate factories moves to Asia, those jobs and job skills are lost forever.

Yonoz
edward said:
That point is true for every product made in China. Add it all up and we have one huge trade deficit because of the sheer volume of products made in Asia.
No, the trade deficit is because the US imports more than it exports, and because more people from the US invest offshore. You can make all your products elsewhere, it's the earnings that truly matter. You can look at non-industrial economies such as Switzerland to see how intelectual wealth can support a country with the one of the world's highest living standards.

edward said:
Another problem is that the factories are now there, the technology is now there, and the technology to build factories is now there.
Then the US should invest more in applied sciences research.

edward said:
Whether or not the bulk of the wealth stays here is still very much in question. U.S. companies are moving their headquarters off shore and many U.S. factories are now owned by foreign corporations.
A little taste of your own medicine...

edward said:
There is no way the U.S. workforce can compete with 17 cent per hour labor. But the problem is much larger. High tech workers are losing jobs as well. Engineers and CAD/CAM designers and operators who have worked in manufacturing are among them.
Globalization does that to western workforces. As I said, we're all in the same boat.

edward said:
When the job skills used to design, build and operate factories moves to Asia, those jobs and job skills are lost forever.
That is why it is necessary to develop frontier applied science fields, because that is where the US has an advantage over countries with lower labour costs.

edward
Yonoz said:
That is why it is necessary to develop frontier applied science fields, because that is where the US has an advantage over countries with lower labour costs.

That is the crux of the problem for the U.S. If there are few such high tech jobs availabe, no one will School and train for them. Many other countries also have joint ventures between govenrment, business and education. The USA frowns on this as being a socialist trait.

In 1975, the United States was third among all nations in the percentage of 18-to-24-year-olds who earned science and engineering degrees. Today, it ranks 17th, behind Taiwan and South Korea, Ireland and Italy.

No one can really pinpoint why this is happening. There is a thread here regarding this subject.