December 15, 2004

ARBITRAGE NATION:

Trade Gap Widens to More Than $55 Billion (Bill Sing, December 15, 2004, LA Times)

The U.S. trade deficit widened nearly 9% to a record $55.5 billion in October, the government reported Tuesday, raising further concerns about the nation's habit of buying more from foreigners than it sells to them.

The larger-than-expected gap, fueled by surging oil prices and record imports from China, also suggested that U.S. economic growth might not be as strong as believed.

Although exports in October grew to a record — thanks partly to the weak greenback, which made U.S. goods cheaper overseas — imports jumped even more.

If the trend continues, the U.S. will continue to run up larger debts to foreigners, threatening its future financial health, some experts said. That could lead to further declines in the dollar, whose slide has accelerated in recent weeks amid worries about swelling U.S. trade and budget deficits.

Many experts said they saw no end in sight.


With nearly the only strong economy in the developed world and a savings rate that's unrivalled, what are we supposed to do with the rest of our disposable income if not spend it on the goods that foreigners make for us on the cheap? Until the Ownership Society and/or the tax code favor savings much more than consumption we'll keep spending our excess cash.

Posted by Orrin Judd at December 15, 2004 9:57 AM
Comments

OJ:

I hope I'm not quibbling--your overall point is spot-on, but presuming we were to start favoring savings, what would happen with them?

Presumably long-term productivity enhancing investment, which leads to ...

... more excess cash.

Posted by: Jeff Guinn at December 15, 2004 11:45 AM

Jeff:

I stand corrected--even the solution leads to us buying more from them.

Posted by: oj at December 15, 2004 12:01 PM

Anonymous has a good point. We'd be on our way to the Japanization of our economy, with reluctant consumers, and industry depending even more heavily on selling overseas. The ownership society will not work with a strong dollar.

Posted by: JimGooding at December 15, 2004 12:13 PM
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