Tag: "trade"

The U.S. Trade Deficit Increases: Alternative Explanations

The goods and services trade deficit widened in September, reversing recent improvements. It was good news that both imports and exports increased after a shrinkage of trade resulting from the global contraction. The deficit increased because imports increased more than exports. Exports or goods and services increased by $3.7 billion to $132.0 billion while imports […]

The Dollar, the Deficits, China Holdings and Domestic Investment

We continue to discuss the topics above as separate issues, without acknowledging their interdependence. They are mutually determined as in the solving of simultaneous equations. For example, our budget deficit indirectly, and our current account deficit more directly, affect the dollar exchange rate and the size of our trade deficit (and capital inflow). With China’s […]

A Trade War with China Wouldn’t be Terribly Helpful Under the Circumstances

Why can’t we learn even the most obvious lessons from the Great Depression? Many policy mistakes were made then, but perhaps the biggest and most destructive was the Smoot-Hawley tariff that contributed to a world-wide trade war and the reinforcement of the depression’s downward spiral. We’ve already dissed our Mexican neighbors by abrogating the trucking […]

Is the Recession Ending?

(I'm Hopeful, but not Convinced)   A Technical Answer The Business Cycle Dating Committee (BCDC) of the National Bureau of Economic Analysis determined that the current recession began when payroll employment started declining in January 2008. I doubt that they well declare the recession over while payrolls continue to decline, even if we get positive […]


Undesirable and Unnecessary   Protectionism is creeping insidiously into the rhetoric of financial TV.  "Taxpayer money should be spent to stimulate the domestic economy, not foreign economies."  "We should be creating domestic jobs, not foreign jobs." This slippery slope to protectionism is undesirable. It won't work. It will invite retaliation. However, it's not only undesirable, […]

International Trade and Investment

A Primer   The balance of payments always balances. That's why they call it the balance of payments. Constant balance (not to be confused with equilibrium) results from double entry accounting where total debits always equals total credits. Each international transaction results in a new debit and a matching new credit; an equal reduction in […]

Will China Buy our Treasuries?

I don't quite have the answer to that question, but I would argue that the question itself reflects some common confusion. If all exchange rates are free to adjust to market forces, they would tend to produce a balance between each country's trade with the rest of the world. Strictly speaking, that assumes no unruly […]

U.S. Foreign Trade

The Good, the Bad, and the Ugly   The Good:  The Trade Deficit is shrinking. The Bad:    Trade is shrinking. The Ugly:   Protectionism is growing. The deficit in U.S. trade in goods and services shrank to $26 billion in February, from a revised $36.2 billion in January. This is good news. On the other hand, […]

A Reversal of the Shrinking Trade Deficit Is Drag on Real GDP Growth

In my last blog for the New York Times, I reviewed the effect of our trade balance on GDP. We've had a deficit (imports>exports) for several years, which is a net minus, or drag, on GDP. However, in recent quarters, in part because of the decline in the dollar until lately, the deficit has shrunk, […]