Comments on: The fall in the US trade deficit in November http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/ Thu, 14 Oct 2010 13:09:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Stock Research Portal Blog - Mining, Oil Gas Educational & Research Data For Investors, Advisors That Empowers Users to Analyze & Monitor Investments http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-123122 Stock Research Portal Blog - Mining, Oil Gas Educational & Research Data For Investors, Advisors That Empowers Users to Analyze & Monitor Investments Sat, 24 Jan 2009 15:49:38 +0000 http://blogs.cfr.org/setser/?p=4461#comment-123122 [...] I recommend you read the entire article in context by clicking here. [...] [...] I recommend you read the entire article in context by clicking here. [...]

]]> By: The Startling Dropoff in Trade Flows | Economist Blog http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122389 The Startling Dropoff in Trade Flows | Economist Blog Thu, 15 Jan 2009 15:34:45 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122389 [...] upon, in terms of the dropoff in both exports and imports signaling a synchronized recession. [1], [2], [3], [4] I have little to add here, except for plotting the “cliff-diving” in log [...] [...] upon, in terms of the dropoff in both exports and imports signaling a synchronized recession. [1], [2], [3], [4] I have little to add here, except for plotting the “cliff-diving” in log [...]

]]> By: The Startling Dropoff in Trade Flows | 1800blogger http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122388 The Startling Dropoff in Trade Flows | 1800blogger Thu, 15 Jan 2009 15:34:16 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122388 [...] upon, in terms of the dropoff in both exports and imports signaling a synchronized recession. [1], [2], [3], [4] I have little to add here, except for plotting the “cliff-diving” in log [...] [...] upon, in terms of the dropoff in both exports and imports signaling a synchronized recession. [1], [2], [3], [4] I have little to add here, except for plotting the “cliff-diving” in log [...]

]]> By: ReformerRay http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122358 ReformerRay Wed, 14 Jan 2009 18:01:01 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122358 One note ReformerRay reiterates _ "We should be forcing a decline in the U.S. trade deficit by changes in U.S. law rather than waiting to see what is given us" One note ReformerRay reiterates _ “We should be forcing a decline in the U.S. trade deficit by changes in U.S. law rather than waiting to see what is given us”

]]> By: Howard Richman http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122351 Howard Richman Wed, 14 Jan 2009 11:09:41 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122351 Brad, It is not clear yet whether November was a blip downward in a rising trade deficit or the beginning of a new trend toward smalller US trade deficits. There are at least four factors operating right now which affect the US trade deficit. Two of them tend to increase the US trade deficit; the other two tend to decrease the deficit: 1. The stronger dollar tends to <i>increase</i> the trade deficit. 2. The United States is a major capital goods (i.e., investment goods) exporter, and investment goods tend to be the hardest hit during a depression. This will tend to <i>increase</i> the trade deficit. 3. A worldwide depression tends to decrease trade overall, reducing both imports and exports. This will tend to <i>decrease</i> the trade deficit. 4. The falling oil prices reduce the cost of America's energy imports. This will tend to <i>decrease</i> the trade deficit. With so many factors operating, the direction of the trade deficit (as a percentage of US GDP) is indeterminate. My guess is that the US trade deficit will grow during the depression. The November statistics may have blipped downward due to the build-up of consumer goods inventories. Once consumer goods inventories stabilize, I'm predicting that the stronger dollar and rapidly falling capital-goods exports will cause the US trade deficit to increase. Howard Richman www.tradeandtaxes.blogspot.com Brad,

It is not clear yet whether November was a blip downward in a rising trade deficit or the beginning of a new trend toward smalller US trade deficits.

There are at least four factors operating right now which affect the US trade deficit. Two of them tend to increase the US trade deficit; the other two tend to decrease the deficit:

1. The stronger dollar tends to increase the trade deficit.

2. The United States is a major capital goods (i.e., investment goods) exporter, and investment goods tend to be the hardest hit during a depression. This will tend to increase the trade deficit.

3. A worldwide depression tends to decrease trade overall, reducing both imports and exports. This will tend to decrease the trade deficit.

4. The falling oil prices reduce the cost of America’s energy imports. This will tend to decrease the trade deficit.

With so many factors operating, the direction of the trade deficit (as a percentage of US GDP) is indeterminate. My guess is that the US trade deficit will grow during the depression. The November statistics may have blipped downward due to the build-up of consumer goods inventories. Once consumer goods inventories stabilize, I’m predicting that the stronger dollar and rapidly falling capital-goods exports will cause the US trade deficit to increase.

Howard Richman
http://www.tradeandtaxes.blogspot.com

]]> By: Rien Huizer http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122343 Rien Huizer Wed, 14 Jan 2009 02:02:53 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122343 Looks like we are slightly overshooting the cyclical correction following some 10-odd years of Chinese carbohydrates growth. As long as the fall in imports reflects less domestic demand for useless consumer goods and luxuries, fine with me, it can only lead to a US economy that can stand on its own feet. Not that I advocate autarchy or mercantilism of course (mercantilism only in exceptional circumstances: for poor countries as a way to climb the first steps of the development ladder and for rich countries if they have to behave strategically in an environment where "free trade" is no longer widely supported internationally). But the US must try to avoid complete addiction to the benefits of reserve currency status, and in the absence of an effective equilibrating mechanism for labor costs (while technology and capital have never been more mobile), no high-cost democratic country can afford policies that turn the reserve currency advantage into unsustainable hedonism. Sooner or later the economy will contract sharply (leading to an isolationist and possibly fascist backlash, Argentinian style) or the reserve status will erode over time and "Argentinian-style" becomes a eufemism. So, a bit of an overshoot perhaps, but possibly a healthy one. My concern is that we are in the process of creating (to avoid normal recessionary and deflationary cyclical effects apparently) a structurally inflationary process of public spending everywhere in the OECD, and that in the presence of labor markets with very little domestic excess labor capacity (the unemployment figures in the EU reflect mainly structural unemployment). If the OECD countries, as a whole of with a few "clubs" would resort to tighter import policies for manufactures etc, we could well switch very quickly (2010/11) move to stagflation, if labor could resurrect the various union movements. Looks like we are slightly overshooting the cyclical correction following some 10-odd years of Chinese carbohydrates growth. As long as the fall in imports reflects less domestic demand for useless consumer goods and luxuries, fine with me, it can only lead to a US economy that can stand on its own feet. Not that I advocate autarchy or mercantilism of course (mercantilism only in exceptional circumstances: for poor countries as a way to climb the first steps of the development ladder and for rich countries if they have to behave strategically in an environment where “free trade” is no longer widely supported internationally). But the US must try to avoid complete addiction to the benefits of reserve currency status, and in the absence of an effective equilibrating mechanism for labor costs (while technology and capital have never been more mobile), no high-cost democratic country can afford policies that turn the reserve currency advantage into unsustainable hedonism. Sooner or later the economy will contract sharply (leading to an isolationist and possibly fascist backlash, Argentinian style) or the reserve status will erode over time and “Argentinian-style” becomes a eufemism.

So, a bit of an overshoot perhaps, but possibly a healthy one. My concern is that we are in the process of creating (to avoid normal recessionary and deflationary cyclical effects apparently) a structurally inflationary process of
public spending everywhere in the OECD, and that in the presence of labor markets with very little domestic excess labor capacity (the unemployment figures in the EU reflect mainly structural unemployment). If the OECD countries, as a whole of with a few “clubs” would resort to tighter import policies for manufactures etc, we could well switch very quickly (2010/11) move to stagflation, if labor could resurrect the various union movements.

]]> By: sfone http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122337 sfone Tue, 13 Jan 2009 23:41:34 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122337 W/ oil averaging <$40/bbl for Dec, you should expect to see AT LEAST a $12bn further improvement from the energy component alone. You should also expect significant contractions in imports, (Japan auto imports are excellent ilustration- we're seeing 10mm SAAR, inventory piling up at the ports and Mike Jackson from AN telling you he's got 1q orders down 50%) and Japans trade balance (60% of which is auto related) to continue to shrink massively. Extrapolating some early retail sales data, SF closings, and claims on general inventory reductions from China's balance also should provide a few $bn in trade improvement. In sum, I would expect an 09 deficit on the order of $250-$300bn, a $400bn or so improvement vs '08 and quite close to the current 4% annualized savings rate for the US household W/ oil averaging <$40/bbl for Dec, you should expect to see AT LEAST a $12bn further improvement from the energy component alone. You should also expect significant contractions in imports, (Japan auto imports are excellent ilustration- we’re seeing 10mm SAAR, inventory piling up at the ports and Mike Jackson from AN telling you he’s got 1q orders down 50%) and Japans trade balance (60% of which is auto related) to continue to shrink massively. Extrapolating some early retail sales data, SF closings, and claims on general inventory reductions from China’s balance also should provide a few $bn in trade improvement. In sum, I would expect an 09 deficit on the order of $250-$300bn, a $400bn or so improvement vs ’08 and quite close to the current 4% annualized savings rate for the US household

]]> By: Isaac http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122334 Isaac Tue, 13 Jan 2009 22:33:42 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122334 The decline in trade volume is not that surprising. Trade volume normally declines in recessions. During the last recession, trade volume fell (on a y/y basis) by as much as 15% (in September 2001). This decline in trade volume is 6.9%. Though we should expect trade volume to continue to decline I'm not sure this says much about the global economy and much more about the nature of a US recession. The decline in trade volume is not that surprising. Trade volume normally declines in recessions. During the last recession, trade volume fell (on a y/y basis) by as much as 15% (in September 2001). This decline in trade volume is 6.9%. Though we should expect trade volume to continue to decline I’m not sure this says much about the global economy and much more about the nature of a US recession.

]]> By: analyst http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122325 analyst Tue, 13 Jan 2009 20:12:53 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122325 i agree. for all the dollar bears out there i would like to know how europe would survive a dollar collapse? the continent would be unable to export anything. So if the dollar collapses so does the rest of the world. Correct? in that case i guess it's fair to argue that the United States can run up infinite deficits. To some extent when Cheney said "Deficits don't matter", maybe he is correct! i agree. for all the dollar bears out there i would like to know how europe would survive a dollar collapse?

the continent would be unable to export anything. So if the dollar collapses so does the rest of the world. Correct?

in that case i guess it’s fair to argue that the United States can run up infinite deficits. To some extent when Cheney said “Deficits don’t matter”, maybe he is correct!

]]> By: don http://blogs.cfr.org/setser/2009/01/13/the-fall-in-the-us-trade-deficit-in-november/#comment-122324 don Tue, 13 Jan 2009 20:08:55 +0000 http://blogs.cfr.org/setser/?p=4461#comment-122324 My guess - Europe is paying more than apace for the U.S. trade balance improvement. They will prove unable to bear the weight. My guess – Europe is paying more than apace for the U.S. trade balance improvement. They will prove unable to bear the weight.

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