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  • Trade Deficit Increase Not Necessarily a Bad Thing

    The U.S. Bureau of Economic Analysis (BEA) announced today that imports and exports both declined in October while the overall trade deficit increased.

    Reactions to the BEA report were misleading.

    For example, the Associated Press reported: “A wider trade deficit acts as a drag on growth.”

    In fact, U.S. trade deficits have almost always heralded a booming U.S. economy. And surpluses are no sure sign of health. Look no further than Greece, for example, which is running a trade surplus while its economy is in shambles.

    Some reporters did a better job of explaining the trade deficit’s impact. Jeffry Bartash at MarketWatch reported: “Falling imports, meanwhile, reflect a softer U.S. economy.”

    Bartash is right. Americans would benefit from a strong, fast-growing economy that gives us more dollars to spend—whether on domestically made products or on imports.

    The bad news in today’s BEA report is not that the trade deficit increased but that exports and imports both declined. The ability to trade more—and to afford more imports—is a sign of economic strength, not weakness. Just ask people in Greece how that trade surplus is working out for them.

    Posted in Economics [slideshow_deploy]

    One Response to Trade Deficit Increase Not Necessarily a Bad Thing

    1. Preston Hay says:

      The US trade deficit is not a good thing, no matter how you globalists paint the picture. Half a trillion in deficit represents 10 million jobs at $50K per job. For more than 20 years we have pursued trade relations that were not in the best interest of the American middle class and the economy reflects that. High unemployment, low growth rate, high deficits, low morale and what do you know, a political fiscal cliff at our feet.
      The giant sucking sound has been heard for over two decades and our manufacturing has been sucked. And that sucks for the American worker.
      But perhaps you can explain to me that this is great for the US worker. At the present deficit rate and a reasonable rise in interest rates, our grandchildren workers will need to pay all of their collected taxes as interest on the national debt.
      I have,in front of me: "The 2012 Long Term Budget Outlook" published by the CBO. The debt presented in this book is the federal debt held by the public. This does not include the unfunded liabilities (promises made by our government, or the debt held by the Fed). I suppose it is a good thing that we don't really pay interest on the Fed-held debt, but the unfunded liabilities will come due one day. The CBO should talk a little bit about that mess.
      Now obviously I am not an economist. So there is some small chance that my argument might make some sense. The probability of a trained economist getting this clear seems to be about zero. It is long story and could have a happy ending, but not with the "experts" we now have.
      But through it all, remember this: The hell with the future generations. What have they ever done for us?

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