The good news is the USA trade imbalance blipped down. The bad news that this is an indicator that our dollar hegemony is ending. Our ability to consume more than we produce is being curtailed and perhaps a trend is beginning: some of the world's poorest people will no longer be lending their savings to enable the world's wealthiest people to buy their goods.
Heck, will all the capital we've transferred to them, their purchasing power will supplant, perhaps replace ours sooner than we imagine. But this is a down the road tangent of the potential unravelling. How inscrutable are the Chinese? And, how far down the road are they planning? It's likely longer than we seem to be doing.
None the less, we invented the model. Recall all the loans that our largest banks made to third world countries to finance the export of our capital goods (weapons' systems, resource extraction, massive engineering projects, etc). Recall how the defaults were socialized here at home (government bailouts of banks that were "too big to fail") and foreclosed abroad (draconian fiscal and monetary restraints imposed on debtor nations.)
Is this a preview? I'm not too sanguine about more rosey scenarios.
Here's an intresting read on the 'mechanics' of doing business offshore from three guys who do it as well as anyone... it ain't no party, it ain't no disco...
My guess on the shrinking trade deficit:
1) consumer is running out of steam. We are simply buying less, thus importing less.
2) Radio announcer said rising trade exports, due to falling dollar. It is true that a weaker dollar makes our products cheaper in other countries. The UCLA Anderson Forecast actually said this was an advantage of the falling dollar: our exports will increase. CR, how would you respond to that premise?
powayseller, a falling dollar should lead to more exports - yes. Its important to note this was the March report, and the dollar has collapsed over the last couple weeks. According to the FT: the US Dollar is at its "weakest level against a trade-weighted basket of currencies since October 1997". So exports should continue to rise as long as the world economy stays healthy.
According to the FT: the US Dollar is at its "weakest level against a trade-weighted basket of currencies since October 1997". So exports should continue to rise as long as the world economy stays healthy.
Setser had a great piece on this a few days ago... here. While the whole 'basket' of currencies shows the dollar weak, the ones kicking our ass aren't... he presented a chart that spells it pretty clearly. If you don't want to read the whole article here's the chart... here.
As long as China pegs & other ASEAN countries maintain a proxy peg via FX markets, then we'll see big import numbers.
The question is will our exports pick up enough to narrow the gap or will the ASEAN countries with favorable exchange rates eat into those markets too. Realize a number of the export powerhouses operating in China are western based MNCs - they don't have to satisfy world demand for their products & services supplied by NAFTA Zone operations.
I'm not certain we'll see a widening gap but I am even less confident we'll see the gap narrow appreciably until some of the currency imbalances are resolved making NAFTA Zone more 'competitive'.
J-curve analysis would argue against a quick improvement in the trade balance due to a weaker dollar. In fact, J-curve analysis predicts the contrary in the near term.
The Port of Long Beach has released April container data, and you are not going to like what you see. Empties up 16.7% y/y, vs 5.6% in March.
The good news is the USA trade imbalance blipped down. The bad news that this is an indicator that our dollar hegemony is ending. Our ability to consume more than we produce is being curtailed and perhaps a trend is beginning: some of the world's poorest people will no longer be lending their savings to enable the world's wealthiest people to buy their goods.
Heck, will all the capital we've transferred to them, their purchasing power will supplant, perhaps replace ours sooner than we imagine. But this is a down the road tangent of the potential unravelling. How inscrutable are the Chinese? And, how far down the road are they planning? It's likely longer than we seem to be doing.
None the less, we invented the model. Recall all the loans that our largest banks made to third world countries to finance the export of our capital goods (weapons' systems, resource extraction, massive engineering projects, etc). Recall how the defaults were socialized here at home (government bailouts of banks that were "too big to fail") and foreclosed abroad (draconian fiscal and monetary restraints imposed on debtor nations.)
Is this a preview? I'm not too sanguine about more rosey scenarios.
Here's an intresting read on the 'mechanics' of doing business offshore from three guys who do it as well as anyone... it ain't no party, it ain't no disco...
Corruption, Unstable Governments, Poor Infrastructure
My guess on the shrinking trade deficit:
1) consumer is running out of steam. We are simply buying less, thus importing less.
2) Radio announcer said rising trade exports, due to falling dollar. It is true that a weaker dollar makes our products cheaper in other countries. The UCLA Anderson Forecast actually said this was an advantage of the falling dollar: our exports will increase. CR, how would you respond to that premise?
powayseller, a falling dollar should lead to more exports - yes. Its important to note this was the March report, and the dollar has collapsed over the last couple weeks. According to the FT
: the US Dollar is at its "weakest level against a trade-weighted basket of currencies since October 1997". So exports should continue to rise as long as the world economy stays healthy.
Best Wishes.
According to the FT: the US Dollar is at its "weakest level against a trade-weighted basket of currencies since October 1997". So exports should continue to rise as long as the world economy stays healthy.
Setser had a great piece on this a few days ago... here. While the whole 'basket' of currencies shows the dollar weak, the ones kicking our ass aren't... he presented a chart that spells it pretty clearly. If you don't want to read the whole article here's the chart... here.
As long as China pegs & other ASEAN countries maintain a proxy peg via FX markets, then we'll see big import numbers.
The question is will our exports pick up enough to narrow the gap or will the ASEAN countries with favorable exchange rates eat into those markets too. Realize a number of the export powerhouses operating in China are western based MNCs - they don't have to satisfy world demand for their products & services supplied by NAFTA Zone operations.
I'm not certain we'll see a widening gap but I am even less confident we'll see the gap narrow appreciably until some of the currency imbalances are resolved making NAFTA Zone more 'competitive'.
J-curve analysis would argue against a quick improvement in the trade balance due to a weaker dollar. In fact, J-curve analysis predicts the contrary in the near term.
The Port of Long Beach has released April container data, and you are not going to like what you see. Empties up 16.7% y/y, vs 5.6% in March.