Comments on: Don’t ignore the adjustment that has taken place; the US trade deficit is half its size this time last year … http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/ Thu, 14 Oct 2010 13:09:54 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: the arguing that matters « Thought Shop http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-134894 the arguing that matters « Thought Shop Sat, 06 Mar 2010 20:37:26 +0000 http://blogs.cfr.org/setser/?p=5927#comment-134894 [...] arguing that matters By Brian Hayes It ain’t socialism done it: The lion’s share of the US deficit now comes from the United States petroleum import [...] [...] arguing that matters By Brian Hayes It ain’t socialism done it: The lion’s share of the US deficit now comes from the United States petroleum import [...]

]]> By: The Latest On The Baltic States And The Swedish Banks Who Operate There | Austrian Economics Blog http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133541 The Latest On The Baltic States And The Swedish Banks Who Operate There | Austrian Economics Blog Thu, 23 Jul 2009 21:48:14 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133541 [...] account deficits of 15-25% of GDP) deficits. In relative terms that makes the American adjustment that Brad Setser is so excited about appear trivial in [...] [...] account deficits of 15-25% of GDP) deficits. In relative terms that makes the American adjustment that Brad Setser is so excited about appear trivial in [...]

]]> By: Warum “toxische” Assets so schwierig zu “entgiften” sind? • Börsennotizbuch http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133450 Warum “toxische” Assets so schwierig zu “entgiften” sind? • Börsennotizbuch Tue, 21 Jul 2009 20:17:30 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133450 [...] “Don’t ignore the adjustment that has taken place; the US trade deficit is half its size this time last year …” (Brad Setser’s Blog). [...] [...] “Don’t ignore the adjustment that has taken place; the US trade deficit is half its size this time last year …” (Brad Setser’s Blog). [...]

]]> By: Why Not Tax Imported Oil? «  Modeled Behavior http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133436 Why Not Tax Imported Oil? «  Modeled Behavior Tue, 21 Jul 2009 15:49:28 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133436 [...] Taxing imported oil would also go a long way towards unwinding international trade imbalances. The majority of the US’s trade deficit is petroleum. That is, to say without imported oil or trade deficit would be cut by more than half. [...] [...] Taxing imported oil would also go a long way towards unwinding international trade imbalances. The majority of the US’s trade deficit is petroleum. That is, to say without imported oil or trade deficit would be cut by more than half. [...]

]]> By: ReformerRay http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133429 ReformerRay Tue, 21 Jul 2009 14:22:40 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133429 Not receiving any help on my question of the composition of the import reduction in the U.S., I compared the composition of imports into the U.S. for the two months of April - May of 2009 to the two months of July - August of 2008. Result: The import decline is primarily in goods that are inputs into production, not consumption. Auto goods and consumer goods accounted for only 22% of the decline. Industrial Supplies and Capital Goods accounted for 75% of the decline. This tells me that the import decline was created by businesses reducing investment and purchases of inputs into production in anticipation of a recession - depression. The realistic conclusion is that this decline in imports will disappear when the economy picks up. Not receiving any help on my question of the composition of the import reduction in the U.S., I compared the composition of imports into the U.S. for the two months of April – May of 2009 to the two months of July – August of 2008.

Result: The import decline is primarily in goods that are inputs into production, not consumption. Auto goods and consumer goods accounted for only 22% of the decline. Industrial Supplies and Capital Goods accounted for 75% of the decline.

This tells me that the import decline was created by businesses reducing investment and purchases of inputs into production in anticipation of a recession – depression.

The realistic conclusion is that this decline in imports will disappear when the economy picks up.

]]> By: Too Much Fed http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133419 Too Much Fed Tue, 21 Jul 2009 02:12:24 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133419 bsetser responds: "too much fed — I think there has been a slight fall in the bilateral deficit with china, though less of a fall than with the big auto exporters (us imports from china are down far less than us imports from Japan)" Notice that the two biggest items to experience big quantity decreases, vehicles and housing, also require the most DEBT to purchase for consumers. Some people can still afford the lower priced items from china and oil although there have been some cutbacks. Is the "monthly payment consumer" in trouble with interest payments because of negative real earnings growth? bsetser responds:
“too much fed — I think there has been a slight fall in the bilateral deficit with china, though less of a fall than with the big auto exporters (us imports from china are down far less than us imports from Japan)”

Notice that the two biggest items to experience big quantity decreases, vehicles and housing, also require the most DEBT to purchase for consumers. Some people can still afford the lower priced items from china and oil although there have been some cutbacks.

Is the “monthly payment consumer” in trouble with interest payments because of negative real earnings growth?

]]> By: HZ http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133413 HZ Mon, 20 Jul 2009 22:42:55 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133413 Brad, Without excessive credit generation, we won't get massive c/a imbalance even with a distorted fx regime. We would get suboptimal trade volume/structure. The way I think about this is: assuming lending is rationally based upon borrowers' future cash flow projections, in aggregate massive deficit would subtract from that cash flow projection (whatever the fx level is at) and therefore should be self-correcting (at least for the private sector). So fx can't explain why the c/a deficit exploded while the fiscal deficit did not. Brad,
Without excessive credit generation, we won’t get massive c/a imbalance even with a distorted fx regime. We would get suboptimal trade volume/structure.
The way I think about this is: assuming lending is rationally based upon borrowers’ future cash flow projections, in aggregate massive deficit would subtract from that cash flow projection (whatever the fx level is at) and therefore should be self-correcting (at least for the private sector). So fx can’t explain why the c/a deficit exploded while the fiscal deficit did not.

]]> By: don http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133410 don Mon, 20 Jul 2009 22:24:47 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133410 Informative post. Bob in MA, you cite one of my favorite observations. Let's hope Treasury doesn't go insolvent. I am wating to see if China keeps its peg, or tries to devalue. Maybe a desire to do so was behind the talk about moving from a dollar standard. My instinct tells me a drop in car imports from Japan and Germany are a noticeable part of the trade balance improvement. The U.S. needs Pigou taxes on oil. The country is really behind the curve on that one. The consumption incentives are aggravating. Informative post. Bob in MA, you cite one of my favorite observations. Let’s hope Treasury doesn’t go insolvent.
I am wating to see if China keeps its peg, or tries to devalue. Maybe a desire to do so was behind the talk about moving from a dollar standard.
My instinct tells me a drop in car imports from Japan and Germany are a noticeable part of the trade balance improvement.
The U.S. needs Pigou taxes on oil. The country is really behind the curve on that one. The consumption incentives are aggravating.

]]> By: gillies http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133402 gillies Mon, 20 Jul 2009 19:01:45 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133402 i think there is a second leg down to this crisis. one of the ingredients of the long boom was growing complacency. that is not coming back. oil and property go up for ever ? no one believes that, not for the time being, anyway. everyone is too polite to mention the most effective way of economising on oil use which is mass unemployment. you can rebuild cities to be pedestrian friendly, compact and car free - but it is easier for a country on the verge of building infrastructure, as opposed to a country replacing existing infrastructure. there might be a renaissance in italian hill towns. i would not expect one for a while in flint, michigan. oil at $60 is a bear market rally for speculators. from here it's either a price decline or more storage tanks, or more ships at anchor to act as storage. our irish economy is to contract at 11% over two years. that's if nothing bad happens ! i feel that the u s deficit will not be 'solved.' attention will drift to some new problem, like rising interest rates causing a home grown savings glut. something like that. i think there is a second leg down to this crisis. one of the ingredients of the long boom was growing complacency. that is not coming back. oil and property go up for ever ? no one believes that, not for the time being, anyway. everyone is too polite to mention the most effective way of economising on oil use which is mass unemployment.
you can rebuild cities to be pedestrian friendly, compact and car free – but it is easier for a country on the verge of building infrastructure, as opposed to a country replacing existing infrastructure.
there might be a renaissance in italian hill towns. i would not expect one for a while in flint, michigan.
oil at $60 is a bear market rally for speculators. from here it’s either a price decline or more storage tanks, or more ships at anchor to act as storage.
our irish economy is to contract at 11% over two years. that’s if nothing bad happens !
i feel that the u s deficit will not be ‘solved.’ attention will drift to some new problem, like rising interest rates causing a home grown savings glut. something like that.

]]> By: Monday links: innovation indigestion Abnormal Returns http://blogs.cfr.org/setser/2009/07/19/don%e2%80%99t-ignore-the-adjustment-that-has-taken-place-the-us-trade-deficit-is-half-its-size-this-time-last-year-%e2%80%a6/#comment-133398 Monday links: innovation indigestion Abnormal Returns Mon, 20 Jul 2009 16:31:59 +0000 http://blogs.cfr.org/setser/?p=5927#comment-133398 [...] An upside to the economic crisis.  The US trade deficit has been cut in half.  (Brad Setser) [...] [...] An upside to the economic crisis.  The US trade deficit has been cut in half.  (Brad Setser) [...]

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