Rolf Englund
Internetional Communications IntCom


U.S. Trade and Current Account Deficit

About this on my blog

US Dollar - US Current Account - U.S. Trade Deficit

US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.
Niall Ferguson, FT February 10 2010

Current Account Imbalances Coming Back
Joseph E. Gagnon (PIIE) January 2011

America has run current-account deficits — which are substantially driven by the balance of trade — almost every year since 1982.
As a result, foreigners own American assets worth $8.1trn more than the assets Americans own overseas, a difference equivalent to 43% of America’s GDP.
The Economist 13 May 2017

Despite this, America still takes in more income from its investments abroad than it pays out.

Many experts around the world think the U.S. current account deficit is the greatest threat to global prosperity.
Congress first became concerned when the deficit hit a record $803 billion in 2006.
That was a dramatic increase from $120 billion in 1996.

Current Account Deficits: Is There a Problem?

How long can the global economy endure America's enormous trade deficits or China's growing trade surplus of almost $500 million a day?
- the United States borrows close to $3 billion a day -
Joseph E. Stiglitz, Herald Tribune, October 3, 2006

Current Account Deficits in Rich Countries
Oliver Blanchard, IMF September 2007

David Stockman 2018

Source: The Economist, June 2010

U.S. Trade Deficit: Causes, Magnitude and Consequenses
Rolf Englund, May 2001

China held about 5.8% of the total debt, or about $1.15 trillion. (Hong Kong, a “special administrative region” of China, held another $202.6 billion.)
China was the top foreign holder of Treasury securities, ahead of Japan, which held just under $1.1 trillion.

Source: Pew

The U.S. trade deficit, with and without petroleum

The blue line is the total deficit, and the black line is the petroleum deficit,
and the red line is the trade deficit ex-petroleum products.

Rolf Englund: Note that these numbers, of course, are monthly....


U.S. Trade Deficit - Statistics

The Economist 14/4 2005

Brad Setser, a former Treasury official who is now at Roubini Global Economics, an economic-analysis firm, reckons that if non-oil import growth continues at its recent pace and the oil price stays over $50 a barrel, America’s annual trade deficit would reach nearly $800 billion by the end of 2005

while the oil price seems to be the most imminent risk, the size and rate of growth of the global imbalances are the real reason to worry. If the world economy continues on autopilot, those imbalances are set to increase. And you do not need to be a Cassandra to predict that, eventually, they will create a nasty problem.

National Center for Policy Analysis: The Meaningless Trade Deficit

Klas Eklund på SvD:s ledarsida 2000-08-11
För 20 år sedan inledde Ronald Reagan en våg av skattesänkningar i västvärlden. När USA sänkte sina skatter skärptes trycket på andra att följa efter. Under en period blundade många i Europa och en rad ekonomer (däribland jag själv) hävdade att Reaganomics var ett oansvarigt tänkande. Men vi hade fel.
USA har ryckt åt sig ett stort försprång och har världens mest framgångsrika ekonomi.

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China and Europe's refusal to reduce their extravagant trade surpluses on U.S. trades
is becoming an unbearable theater of the absurd.
America's rising trade and budget deficits call for decisive action.
CNBC 20 August 2018

Washington's huge fiscal and monetary stimuli will give the world economy an estimated $600 billion shot in the arm this year.

That amount represents the difference between the expected U.S. purchases and sales of goods and services in world trade.

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America’s current-account deficit is headed to more than 3% of nominal GDP

project-syndicate 2018-08

Germany’s finance minister’s obsession with surpluses will damage EU neighbours
Germany has been running current account surpluses of around 8 per cent for the past couple of years.
Wolfgang Münchau FT 6 May 2018

If foreigners use their dollars to build a factory in, say, South Carolina, our real economy gets a boost that neutralizes the circular flow’s leak. But if they only buy stocks and bonds in our financial economy, that shouldn’t provide as much of an offset to the leak.

Well, data show the foreign sector mostly draining dollars from our real economy and then investing them in our financial economy.... more here

US Current Account Deficit at Google

Källa Ekonomifakta januari 2018

IMF 2018 External Sector Report
While the current configuration of global excess imbalances does not pose an imminent danger, we project that,
under planned policies, these imbalances will grow over the medium term, eventually posing a risk to global stability.
Maurice Obstfeld IMF 24 July 2018

Higher-than-desirable current account balances prevail in northern Europe—in countries such as Germany, the Netherlands, and Sweden—as well as in parts of Asia—in economies like China, Korea, and Singapore.

Lower-than-desirable balances remain largely concentrated in the United States and the United Kingdom.

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IMF Sounds The Alarm On Global Debt, Warns "United States Stands Out"
zerohedge 18 April 2018

/The current-account deficit increased to $466.2 billion (preliminary) in 2017 from $451.7 billion in 2016./

If it weren't for oil and gas, the trade deficit would be a lot bigger.
The U.S. current account deficit grew a bit at the end of last year, to $128.2 billion in the fourth quarter.
That amounts to 2.6 percent of gross domestic product, which from the perspective of the past 15 years or so isn't all that big.
Justin Fox Bloomberg 21 mars 2018

The goods trade balance has been pretty much the sole driver of the big increase in the current account deficit since the early 1980s.

The U.S. trade deficit in goods that aren't oil and gas is now bigger than ever, both in dollar terms and as a share of GDP.

The oil and gas trade balance, which was 4.1 percent of GDP in the fourth quarter of 2004, is rapidly nearing zero, and all indications are that it will turn positive soon.

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De stora obalanserna i världshandeln är, precis som Trump hävdar, ohållbara.
De kraftiga överskotten i länder som Kina och Tyskland är orimliga och
underskotten i USA och Sydeuropa undergräver människors tilltro till demokrati och marknader.
Ulf Dahlsten SvD 15 mars 2018

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US twin deficits
As the dollar weakened last week, Martin Feldstein’s catchphrase from the 1980s
was on the lips of most macro traders.
Gavyn Davies.FT 18 February 2018

This is what happened to the “twin deficits” during the Reagan and Bush fiscal injections

Provided the Fed remains independent from politicians, a dollar crisis seems most unlikely.

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Martin Feldstein (1993)

Germany digs in heels as world anger mounts over its toxic trade surplus, the world’s largest in absolute terms
The currency claim may raise eyebrows in Washington, where some suspect that the European Central Bank’s negative interest rates (-0.4pc) are a disguised way to hold down the euro – bad etiquette for a currency bloc running a surplus near $430bn, three times that of China.
Ambrose 18 January 2018

U.S. Trade Deficit Balloons to Widest in Almost Six Years
Bloomberg 5 January 2018

Gap grew 3.2% to $50 b
Imports rose 2.5% to a record $250 b
Exports climbed 2.3% to all-time high of $200 b

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The administration seems set on vast tax cuts at a time of near full employment.
It suggests that this will somehow create a huge upsurge in growth. That is not inconceivable, but it is hugely unlikely.
More likely are rising inflation, a sharp rise in interest rates, a higher dollar and a huge surge in the current account deficit.
Martin Wolf, FT 13 October 2017

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It is not America’s current account deficit that looks scary now —
that dubious honour goes to some emerging market countries and oil producers such as Saudi Arabia.

Since the crisis, low oil prices have eliminated a big part of the /savings/ glut.
The German and Chinese contributions, which fell after the crisis, are approaching 2007 levels again

FT 14 August 2017, nice chart

The current preoccupation with large and persistent current-account imbalances is justified.
But it rests on flawed assumptions. The truth is that all current-account imbalances are not created equal.
Charles Wyplosz, Project Syndicate 11 August 2017

It is excessive public spending financed by external borrowing that is most worrisome, because highly indebted governments can default more easily than private entities.
Unlike firms and households, states cannot be closed down or forced to sell assets.
Moreover, they may have some political leverage, as was the case with Greece and Portugal during the euro crisis.

Large and persistent external deficits create vulnerability, because they result in the buildup of debt that can eventually become worrisome for lenders, while locking borrowers into an inescapable pattern of borrowing.

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Read more here

Not counting petroleum products, the U.S. trade deficit in goods is as big as it has ever been
As someone who came of age in the worrying-about-trade-deficits era, I cannot help but find this ... worrisome.
Justin Fox, Bloomberg 9 augusti 2017

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Germany overtakes China as largest surplus economy, IMF data show
Germany ran a current-account surplus of $289bn, or 8.3 per cent of GDP in 2016
while China’s fell to $196.4bn, or 1.7 per cent of GDP. 

The US had a current-account deficit of $451.7bn, or 2.4 per cent of GDP.
FT 28 July 2017

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Will a Smaller Fiscal Deficit Cause the Trade Deficit to Decline or Unemployment to Rise?
Michael Pettis, The Carnegie Endowment for International Peace 22 May 2017

U.S. investment exceeds U.S. savings, and the United States runs a trade deficit that is by definition equal to the gap between investment and savings.
It also runs a capital account surplus equal to the gap because this is the amount of net foreign capital inflow that bridges the gap, and the trade account and the capital account for any country must always balance to zero.
So far there is no disagreement here.

The model Shultz and Feldstein use is the same model, on the surface, that I and most other trade economists use, and is built around accounting identities that can never be violated.

However, accounting identities do not tell us the direction in which causality flows, and so all identity-based arguments must implicitly make assumptions about which of the variables drive the other.

That is the nub of the claim Shultz and Feldstein make. They argue that if we cut the U.S. fiscal deficit, the U.S. trade deficit must automatically decline.

History certainly does seem to suggest that U.S. capital markets are essentially shock absorbers for capital flow requirements around the world.

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For US President Donald Trump, the measure of a country’s economic strength is its current-account balance
– its exports of goods and services minus its imports. This idea is of course the worst kind of economic nonsense.
It underpins the doctrine known as mercantilism, which comprises a hoary set of beliefs discredited more than two centuries ago.
Mercantilism suggests, among other things, that Germany is the world’s strongest economy, because it has the largest current-account surplus.
Barry Eichengreen, Project Syndicate 14 May 2017

President Trump abandons the strong dollar policy
Gavyn Davies, 15 April 2017

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President Donald Trump triggered a slide in the US dollar
as he complained the currency has risen too high
also revealed a major policy U-turn as he said that the US government would not label China a currency manipulator.
FT 12 April 2017

Soaring Trump dollar risks global trade war and China currency crisis, warns Posen
Donald Trump will succeed in ramming through radical tax cuts and fiscal stimulus, causing US federal borrowing to balloon.
The Peterson Institute thinks the current account deficit could rise to 5pc of GDP.
Ambrose Evans-Pritchard, 11 April 2017

The US president signed an executive order on Friday 2017-03-31
calling for a 90-day country-by-country and product-by-product
study of the US’s $500bn annual trade deficit.
FT 31 March 2017 

“The jobs and wealth have been stripped from our country year after year,
decade after decade, trade deficit upon trade deficit,” he said.
“Thousands of factories have been stolen from our country.”

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America's Unsustainable Current Account Deficit
"Never in the history of modern economics has a large industrial country run
persistent current account deficits of the magnitude posted by the U.S. since 2000."
National Bureau of Economic Research, 23 January 2017

The amount of foreign capital inflows required to sustain an American economy in which both the government and individuals eschew savings and spend beyond their means
-- and imports far exceed exports -- has soared to record highs.

A day of reckoning for what economists call our "current account deficit" is likely to arrive soon.

And the price will be paid in a currency drop that will significantly reduce domestic economic growth.

That's the conclusion of a study by NBER Research Associate Sebastian Edwards.
In Is the U.S. Current Account Deficit Sustainable? And If So How Costly Is Adjustment Likely to Be?
(NBER Working Paper No. 11541)

The result, Edwards believes, would be a 21-to-28 percent depreciation in the value of the trade-weighted dollar and a considerable slowdown of the American economy.
And that may be a "best case" scenario. He warns that the damage inflicted on the U.S. economy by a sharper and/or more immediate correction in the current account deficit could actually be much worse.

"I have not presented the results from 'pessimistic' scenarios, where foreigners reduce their net demand for U.S. assets below the current level (of about 30 percent of GDP).

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U.S. Trade Deficit: Causes, Magnitude and Consequenses
Rolf Englund, May 2001

US trade deficit widened to a near five-year high in January
The trade gap grew by $4.2bn to $48.5bn in January
FT 8 March 2017


US policymakers should worry about China’s capital account, not its current account.
That is where danger now lies.
Martin Wolf, FT 4 April 2017

The macroeconomic issue is simple:
China saves more than it can profitably invest at home.
In 2015, gross national savings were 48 per cent of GDP.

Mr Xi has people in his government who at least understand these issues.
Is the same also true for Mr Trump? The stability of the world economy depends on the answer.
Alas, I suspect it is no.

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What's Really Driving the Trade Deficit
During this time trade imbalances were mostly determined by direct differences in the cost of traded goods, while capital flowed from one country to another mainly to balance trade flows. Today, however, conditions have changed dramatically.
Capital flows dwarf trade flows, and investment decisions by fund managers determine their direction and size.
Michael Pettis, Bloomberg 3 April 2017

This has profound implications for trade.

Large, persistent trade surpluses such as the one China runs with the U.S. are no longer the consequence of explicitly mercantilist measures.
Instead, they're driven by policies that distort domestic savings rates by subsidizing production at the expense of households.

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US President Donald Trump suffers from an acute strain of trade deficit disorder.
The US has trade deficits with 101 nations. This is not a bilateral problem.
Reflects a far deeper problem: the US’s saving deficit.
Stephen Roach, FT 7 March 2017

Lacking in saving and wanting to grow, the US must import saving from countries like China, Germany, and Japan, which have big surpluses.
But it must run a massive balance of payments deficit in order to attract the foreign capital.

Since 2000, the cumulative $8.3tn balance of payments deficit has been almost identical to the $8.6tn multilateral trade gap over the same period.

Trade deficit disorder is a manifestation of that denial, which can lead to major policy blunders and destabilising dislocations at home and abroad.
It offers the fantasy of a bilateral solution for a multilateral problem.

This delusion must be treated before it is too late.

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I see a story driven less by a swing in global capital flows and
more by a swing in global commodity prices (and changes in the global pattern of commodity production).
Brad Setser, March 15, 2017

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In a recent talk at the Council on Foreign Relations
former US Treasury Secretary Larry Summers described himself as a “chastened prophet”
– a description that former Chairman of the Fed Paul Volcker also embraced.
Both warned about the risks associated with large US current account deficits several years ago.

Brad Setser May 25, 2007

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The Federal Reserve might be doing the right thing for the U.S. economy by moving to bring interest rates back up to normal.
But for foreign companies and governments that have borrowed trillions of U.S. dollars, the adjustment could be painful.
Mark Whitehouse, Bloomberg 19 March 2017

As of September, non-bank companies and governments outside the U.S. had some $10.5 trillion in dollar-denominated debt outstanding, according to the Bank for International Settlements.

That's more than triple the level of September 2004, the last time the Fed was about this far into a cycle of rate increases

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The Dollar, Bretton Woods, Triffin and China
Carmen Reinhart, Project Syndicate 2 March 2017

The divergence between the trends for production and finance emerges as a relatively
smaller US economy supplies reserve assets in step with rising global demand for them (primarily from emerging markets).

The Bretton Woods system came to an end in March 1973, when the dollar and other major currencies were allowed to float and the dollar depreciated further.

Now as then, the US could meet the rest of the world’s appetite for dollars by issuing more dollar debt.

This would require the US to run sustained current-account deficits, mirrored in fiscal deficits.

Of course, while the link to gold is passé, any domestic fiscal objective to curb US debt growth would be at odds with the international role as sole provider of the reserve currency.

Carmen Reinhart is Professor of the International Financial System at Harvard University's Kennedy School of Government.

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The United States has the world's largest trade deficit and has run one since 1975.
In 2015, the deficit on goods and services was $500.4 billion, higher than the $490.2 billion deficit in 2014.
The deficit occurred because exports, at $2.3 trillion, were lower than imports, at $2.761 trillion.
(Source: "U.S. International Trade in Goods and Services," U.S. Census Bureau.)

The U.S. trade deficit in goods alone was $762.5 billion, 2.4 percent higher than last year.

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From the mid-1970s to 2008, the US economy had kept global capitalism in
an unstable, though finely balanced, equilibrium.

It sucked into its territory the net exports of economies such as those of Germany, Japan and later China,
providing the world’s most efficient factories with the requisite demand.

How was this growing trade deficit paid for?
Yanis Varoufakis 11 November 2016

United States Current Account 1960-2017

In the early 1990’s, Foreign Affairs devoted an entire issue to an article written by political science professor Samuel Huntington titled the “Clash of Civilizations,” which predicted a terror war between Islam and the west.
And now Peter Peterson just wrote an article about the deficit crisis facing the United States and the almost inevitability of a dollar crisis.
Peterson succeeded David Rockefeller as the Chairman of the Council for Foreign Relations in 1985.
He had been the CEO of Lehman Brothers. He served as Secretary of Commerce in the Nixon administration.
Mr. Swanson 11/4 2005

What I want to underscore in this article is the point that the people in the know all recognize the reality of the deficits our country faces and the high possibility of a full-blown dollar crisis. They know the dollar will drop.

Riding for a Fall, Peter G. Peterson From Foreign Affairs, September/October 2004
This article is adapted from "Running on Empty: How the Democratic and Republican Parties Are Bankrupting Our Future and What Americans Can Do About It,"

News Release: U.S. International Transactions
US Department of Commerce

Before 1971, US global hegemony was predicated upon America’s current-account surplus with the rest of the capitalist world,
which the US helped to stabilize by recycling part of its surplus to Europe and Japan.
This underpinned economic stability and sharply declining inequality everywhere.
But, as America slipped into a deficit position, that global system could no longer function,
giving rise to what I have called the Global Minotaur phase.
Yanis Varoufakis, Project Syndicate 28 November 2016


The U.S. current account deficit decreased to $113.0 billion in the third quarter of 2016 from $118.3 billion
The deficit decreased to 2.4 percent of GDP from 2.6 percent in the second quarter.
BEA 15 December 2016

The U.S. current-account deficit rose 11.7% in the third quarter 2015 to the highest level since 2008
The deficit increased to a seasonally adjusted $124.1 billion from a revised $111.1 billion in the second quarter
It’s the biggest gap since the fourth quarter of 2008.
MarketWatch 17 December 2015

As a percentage of the U.S. economy, the current-account deficit equaled 2.7% of gross domestic product, up from 2.5% in the prior quarter. That’s the highest percentage in three years.

The U.S. current account deficit is down sharply from the peak of 6.5% of GDP in the fourth quarter of 2005,
but it’s up from the most recent low of 2.4% in mid-2009.

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Current Account Deficits: Is There a Problem?
A common complaint about economics is that the answer to any question is, “It all depends.”
IMF March 2012

If the deficit reflects an excess of imports over exports, it may be indicative of competitiveness problems, but because the current account deficit also implies an excess of investment over savings,
it could equally be pointing to a highly productive, growing economy.

If the deficit reflects low savings rather than high investment, it could be caused by reckless fiscal policy or a consumption binge.
Or it could reflect perfectly sensible intertemporal trade, perhaps because of a temporary shock or shifting demographics.

Without knowing which of these is at play, it makes little sense to talk of a deficit being “good” or “bad.”
Deficits reflect underlying economic trends, which may be desirable or undesirable for a country at a particular point in time.

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How Dangerous Is the U.S. Current Account Deficit?
Cletus C. Coughlin , Michael R. Pakko , William Poole

The Federal Reserve Bank of St. Louis April 2006

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For US President Donald Trump, the measure of a country’s economic strength is its current-account balance
– its exports of goods and services minus its imports. This idea is of course the worst kind of economic nonsense.
It underpins the doctrine known as mercantilism, which comprises a hoary set of beliefs discredited more than two centuries ago.
Mercantilism suggests, among other things, that Germany is the world’s strongest economy, because it has the largest current-account surplus.

The explanation for Germany’s external surplus is that it saves more than it invests.
The correspondence of savings minus investment with exports minus imports is not an economic theory; it’s an accounting identity.
Germans collectively spend less than they produce, and the difference necessarily shows up as net exports.

In 2016, Germany ran a current-account surplus of roughly $ 297 billion, or 8.6% of GDP
Changing the exchange rate would not diminish the incentive for Germans to save.
In the current European environment of near-zero interest rates, there’s little risk that additional public investment will crowd out private investment.
Barry Eichengreen, Project Syndicate 14 May 2017

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Handelsutbyte är nog bra, med betoning på utbyte.
Men om ett land, t ex USA, har ett stort underskott och två andra länder, t ex Tyskland och Kina, har stora överskott, då blir det ju inget fullständigt utbyte.
Jag är nog Merkantilist i den meningen att jag tror det är bättre att ha ett litet överskott i utrikeshandeln än att ha stora underskott.

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U.S. Trade Gap Widens to $55.5 billion a 10-Year High
Overall exports came in at $211 billion
Imports $266.5 billion
Bloomberg 6 december 2018

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US trade deficit increases more than expected in September and is now up 10% for 2018
The shortfall rose to $54 billion for the month, and reflective of a 10.1 percent increase year to date
CNBC 2 November 2018

The goods deficit stood at $76.3 billion, the highest on record on a seasonally adjusted basis.

Exports increased to $212.6 billion, a $3.1 billion gain from August,
while imports rose $3.8 billion to $266.6 billion.

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America’s foreign trade deficits on goods transactions are getting worse.
Trade deficits with the EU and China, growing at respective annual rates of 15 percent and 10 percent
Michael Ivanovitch CNBC 9 July 2018

Michael Ivanovitch served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York,
and taught economics at Columbia Business School.

Washington must make it possible to bring back into productive labor force some of the 95 million Americans without jobs and a meaningful future.

The U.S. administration deserves credit for boldly moving to stop decades of rising trade deficits and foreign debt.
It should do that by negotiating its unassailable trade case with Germans and the Chinese.
Shooting tariff hits to force concessions is a road to nowhere.

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The U.S. trade deficit shrank 2.1% in April to a seven-month low.
But the gap is still on track to widen in 2018 to the highest level in a decade.
MarketWatch 6 June 2018

Year-to-date, the goods and services deficit increased $20.8bn from the same period in 2017. (FT)

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China is an easy political target.
After all, it accounted for 46% of America’s colossal $800 billion merchandise trade gap in 2017.
Stephen S. Roach Project Syndicate 23 May 2018

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Underskottet i USA:s handelsbalans ökade till 57,6 miljarder dollar, motsvarande drygt 483 miljarder kronor, i februari
Det är den sjätte månaden i rad som USA:s handelsunderskott ökar och är det största på nio år
SvD/TT 5 april 2018

OBS att underskottet är på en månad.

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The U.S. trade deficit rose to $56.6 billion in January and hit a nearly 10-year high
MarkerWatch 7 March 2018

The funny thing is that Trump has an overwhelming case.
US experienced its last annual trade (goods) surplus in 1975.
David Stockman 5 March 2018

Since then, there has been a continuous and deepening of the US trade deficit. That is, a 43-year plunge into the red that marks the vast off-shoring of US production, jobs, and wages.

In all, it cumulates to about $15 trillion more of stuff America bought versus what it sold to the rest of the world since 1975

Even when you throw in the $4 trillion surplus on the services account ( tourism, transportation, insurance, royalties and business services) during the same 43-year period, the deficit on current account with the rest of the world is still $11 trillion, and that's in then-year dollars.

Inflated to 2017 purchasing power, the balance with the rest of the world since 1975 is well larger than the current GDP of the US.

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American consumers have relied on appreciation of equity holdings and home values
to support over-extended lifestyles.

Stephen S. Roach 26 February 2018

It is also the case for the US Federal Reserve, which has turned to unconventional monetary policies to support the real economy via so-called wealth effects.

Over the past 35 years, America has /been/ running balance-of-payments deficits every year since 1982 (with a minor exception in 1991, reflecting foreign contributions for US military expenses in the Gulf War).

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2017 the U.S. trade gap leaped to a nine-year high of $566 billion.
The last time the U.S. ran a surplus was in 1975.
MarketWatch 6 February 2018

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China and these 10 countries account for most of the trade deficit

U.S. Trade Deficit Balloons to Widest in Almost Six Years
Bloomberg 5 January 2018

Gap grew 3.2% to $50 b
Imports rose 2.5% to a record $250 b
Exports climbed 2.3% to all-time high of $200 b

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U.S. trade deficit shows no sign of shrinking
The trade gap in goods with China increased to $33.6 billion in July
MarketWatch 6 Sept 2017

It was unchanged with Germany at $5.5 billion.

The deficit with China was the highest in a year.

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Germany’s trade surplus is a threat to global stability
Amounts to 9 pc of GDP.
Measured by capita, it is roughly three times the size of the Chinese trade surplus
Matthew Lynn, Telegraph 15 April 2017

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America hardly makes any of the stuff it buys from China anymore
The U.S. trade deficit totaled $501 billion in 2016 and China accounted for about 62% of the overall gap.
MarketWatch 6 April 2017

In early February, Germany announced a new record trade surplus: $281bn, versus $210bn for China.
Peter Navarro, Mr Trump’s chief trade adviser, has accused Germany of exploiting the “grossly undervalued”
implied Deutschmark exchange rate to the detriment of both its European neighbours and the US.

Pierre Henri-Flamand, FT 2 April 2017

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US trade deficit widened to a near five-year high in January
The trade gap grew by $4.2bn to $48.5bn in January
FT 8 March 2017

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12 x 48,5 = 582 miljarder dollar

US President Donald Trump suffers from an acute strain of trade deficit disorder.
The US has trade deficits with 101 nations. This is not a bilateral problem.
Reflects a far deeper problem: the US’s saving deficit.
Stephen Roach, FT 7 March 2017

One of the defining characteristics of the Trumpites is that they are locked in the 1980s.
They believe that the Euro is an invention by the Germans to pursue higher exports by stealth.
But if that were the kind of tactic that Schaeuble were pursuing,
he would answer his American critics by denying that Germany’s imbalance is at all relevant.

Adam Tooze, 6 February 2017


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Trump has (mainly) got it wrong about Germany manipulating the euro
The country has amassed €1.5 trillion in net foreign assets (half of this through poorly secured intra-ECB Target-2 lending)
David Marsh, MarketWatch Feb 6, 2017

Germany’s current account surplus of 9% of gross domestic product, the biggest in the world in dollar terms, underlines an uncomfortable disequilibrium caused by EMU but extending far beyond it. Three-quarters of Germany’s current-account surplus last year was with seven counties — the U.S., the U.K. , France, Sweden, Austria, Canada and Denmark — five of which are outside the eurozone.

This year will be the 12th consecutive year in which Germany registers a surplus around or higher than 6% of GDP,
making a mockery of the Europe’s pretence of controlling macroeconomic imbalances.

Wise German thinkers — including Schäuble himself — realize that years of current-account surpluses are not good news for Germany.
The country has amassed €1.5 trillion in net foreign assets (half of this through poorly secured intra-ECB Target-2 lending), important parts of which will probably be unrepayable.

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Germany trade surplus of nearly $300bn outpacing China by more than $50bn
Schäuble blames ECB for euro that is ‘too low’ for Germany
FT 5 February 2017

According to the Ifo Institute, Germany recorded a trade surplus of nearly $300bn last year, outpacing China by more than $50bn to hold the world’s largest trade surplus.

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In 1971, European finance ministers told John Connally, then US Treasury secretary, that American monetary policy was creating problems for Europe because it was exporting inflation.
Connally replied: “The dollar is our currency, but it’s your problem.”

Today Peter Navarro, the head of President Donald Trump’s National Trade Council, argues that Germany is using an undervalued euro to export deflation.
If Angela Merkel, the German chancellor, were like Mr Trump she would probably tell him that the euro was “our currency and his problem”.

The mere fact that Germany has joined the euro leads to an undervaluation of the German currency. This is probably correct, but his argument that the existence of the euro explains the US trade deficit is still flawed.
Mr Navarro neglects US trade with eurozone members other than Germany. For countries such as Italy, Spain or France, the exchange rate to the dollar would be lower than today if they went back to national currencies. In this case they would export more to the US and import less.

Clemens Fuest,
president of the Ifo Institute and director of the Centre for Economic Studies at the University of Munich
FT 2 February 2017

Is Germany a Currency Manipulator?
Will the administration call for Germany’s exit from the euro?
Jeromin Zettelmeyer (PIIE)February 1, 2017

Jeromin Zettelmeyer, senior fellow at PIIE, is a former director-general for economic policy at the German Federal Ministry for Economic Affairs and Energy.

Navarro's central economic assertion — that “while the euro freely floats in international currency markets,
this system deflates the German currency from where it would be if the German Deutschmark were still in existence”
— is uncontroversial.

If Germany were to leave the euro area, German exports would become more expensive and German imports cheaper, reducing the German current account surplus

Freely floating currencies are consistent with large, persistent deviations from trade and current account balance. The reason is that freely floating exchange rates are shaped not only by demand for and supply of currency associated with trade but also with the demand for currency associated with investment flows.

In fact, the initial consequence of euro membership was not to make Germany more competitive.
Quite the reverse: /se Wolodarski 2003/
Because of north-south capital flows and faster productivity growth in the poorer euro member countries,
Germany quickly became overvalued within the euro area, triggering a recession in 2003.

If the diagnosis is that euro membership constitutes currency manipulation, will the administration call for Germany’s exit from the euro?
Such an exit would disrupt Europe economically and politically, and wreak havoc on the world economy.

The United States has complained about the German current account surplus for years, and so has the European Commission.

The result of these complaints has been a set of policy recommendations directed at Germany

Yet, the German government has refused to implement them, partly because of the Ministry of Finance’s obsession with balanced budgets, and partly because these reforms are politically difficult

If the Trump administration were to throw its political and economic weight behind these reforms, it would be good for Germany, Europe, and the United States.

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As a matter of strict objective fact, Donald Trump’s trade guru is correct.
Germany is the planet’s ultimate currency manipulator.
Ambrose, Telegraph 1 February 2017

The implicit Deutsche Mark is indeed “grossly undervalued”
The warped mechanism of monetary union allows Germany to lock in a permanent ‘beggar-thy-neighbour’ trade advantage over Southern Europe,
inflicting mass unemployment on the victim countries and blighting their futures.

Whatever you think of Peter Navarro’s trade philosophy,
he is right that Germany’s chronic, huge, and illegal current account surplus - 8.8pc of GDP - saps global demand and seriously distorts the world economy.

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Is Navarro right about Germany and the trade surplus?
So yes, the criticism is fair.
Eurointelligence 1 February 2017

Read more here

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The orthodox view is that the US can always achieve full employment by active use of fiscal and monetary policy tools.
Experience since 2000 and especially since the financial crisis suggests this may be difficult.

As I have argued elsewhere, huge current account surpluses in some countries forced deficit countries into financial excesses
as an (ultimately unsustainable) way to maintain demand in line with potential output.
Martin Wolf, FT 31 January 2017

Martin Wolf, The Shifts and the Shocks: What We've Learned--and Have Still to Learn--from the Financial Crisis Paperback – November 24, 2015 Amazon

The crisis vindicated the concern of John Maynard Keynes about the potentially
malign role of surplus countries in the global economy.

In 1950, employment in manufacturing was 13m, while that in the rest of the economy was 30m.
By the end of 2016, it was 12m and 133m, respectively.

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Der Spiegel January 28, 2017

I have been wrong since at least 2001
U.S. Trade Deficit: Causes, Magnitude and Consequenses
Stein's Law: If something cannot go on for ever it will stop.

Trade Deficit at $42.6 Billion in October 2016
Calculated Risk 6 December

America’s growing strong dollar conundrum poses a threat to Mr Trump’s vows to slash the trade deficit
FT 13 December 2016

William Cline, a senior fellow at the Peterson Institute for International Economics, see further currency gains ahead.

He estimates in a new research report that as of mid-November the dollar was overvalued by roughly 11 per cent,
and argues that fiscal stimulus and associated interest rate increases risk yet further increases in the dollar.

The US current account deficit is on track to widen from 2.7 per cent of gross domestic product this year to nearly 4 per cent by 2021.

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Sustained recovery requires decreased domestic US spending and
increased domestic spending in China and much of the rest of the world,
together with adjustments in exchange rates.
Olivier Blanchard, Financial Times, June 18 2009
The writer is chief economist of the IMF

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We should expect the Trump administration to pay particularly attention to the US trade deficit
and if the trade deficit grows Trump is likely to blame countries like Mexico and China for that.
The paradox is that Trump’s own policies combined with the Federal Reserve’s likely response to the fiscal expansion
(higher interest rates) in itself is likely to cause the US trade deficit to balloon.
The Market Monetarist, 18 November 2016

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The US has a current account deficit because the US national savings rate is very low.
Household savings fell to just 3.3 per cent of gross domestic product last year and corporate savings to just 4.6 per cent.
More than three-quarters of these private savings were offset by the 6.1 per cent of GDP dissaving by the federal, state and local governments.
So even with a relatively low level of business investment and residential construction,
the excess of national investment over national savings resulted in a current account deficit of 2.3 per cent of GDP.
Martin Feldstein, FT May 15, 2014

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The overall trade-weighted value of the renminbi has not changed in the past decade
but the Chinese currency has strengthened by 30 per cent relative to the dollar during those 10 years.

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The US trade deficit narrowed to its lowest level in four years in November,
as rising sales of oil pushed US exports to a record high.
BBC 7 January 2014

Remember Joe Sixpack?
Having spent most of the postwar decades acting as the world’s consumer of last resort,
America’s middle class was expected to play a more modest role after the 2008 crash. For a few years, US consumption went into hibernation.
Now, with China’s growth slowing, Europe’s stalled and some of the early excitement fading from Japan’s “Abenomics”,
prospects for global growth once again hinge on Joe’s appetite to spend.

Edward Luce, Financial Times, July 7, 2013

The US middle class is hardly in an ideal condition to roar back as the engine of world growth. Median earnings have fallen by 5.4 per cent since the US recovery began. Unemployment remains closer to 8 per cent than 7 per cent. And households have at least temporarily stopped paying off their debt.

In May, surging imports pushed the US trade deficit up by 12 per cent to $45bn, which was the largest jump in five years.

Imports from China accounted for almost two-thirds of that. If it continues, the US-China deficit will exceed $300bn this year.

Meanwhile, US exports fell.

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The US trade deficit unexpectedly widened in November to USD 48.7 billion,
exceeding all estimates in a Bloomberg survey of economists and the biggest since April,
from $42.1 billion in October. Falling petroleum prices prevented the import bill from climbing even more
Bloomberg 11 January 2013

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The US trade deficit shrank in February to $46 billion, the smallest since October
as imports fell by the most in three years,
reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods
Bloomberg/BBC 12 April 2012

Exports rose by 0.1% to an all-time high of $181.2bn

Imports fell by 2.7% to $227.2bn, with imports from China down by 18.2%.

The current-account deficit in the U.S. widened more than forecast in the fourth quarter
to $124.1 billion, the biggest in three years
Bloomberg 14 March 2012

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The trade deficit in the U.S. widened in January to 53 billion
Imports advanced 2.1 percent to 233 billion
Exports increased 1.4 percent to 182 billion
Bloomberg 9 March 2012

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Record imports widen US trade deficit to $48.8bn in December
BBC 10/2 2012

Imports rose 1.3% to a record $227.56bn, boosted by demand for foreign cars and machinery.

US exports grew slightly, by 0.7 percent to $178.8 bn helped by the weak dollar

The widening of the trade gap was bigger than had been expected.

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49 x 12 = 588

Nice chart, as always, at CalculatedRisk

Ask yourself: Why is it so hard to restore full employment?
It’s true that the housing bubble has popped, and consumers are saving more than they did a few years ago.
But once upon a time America was able to achieve full employment without a housing bubble and with savings rates even higher than we have now.
What changed? The answer is that we used to run much smaller trade deficits
Paul Krugman, New York Times, 2 October 2011

A return to economic health would look much more achievable if we weren’t spending $500 billion more each year on imported goods and services than foreigners spent on our exports.

To get our trade deficit down, however, we need to make American products more competitive, which in practice means that we need the dollar’s value to fall in terms of other currencies.

That, above all, means China. And none of the arguments against holding China accountable can stand serious scrutiny. Some observers question whether we really know that China’s currency is undervalued. But they’re kidding, right?

The flip side of the manipulation that keeps China’s currency undervalued is the accumulation of dollar reserves — and those reserves now amount to a cool $3.2 trillion.

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US trade deficit widens to $ 53.1 bn in June
Total exports for the month fell by $ 4.1 bn to $ 170.9 bn
Imports fell by $ 1.9 bn to $ 223.9 bn.
BBC 11 August 2011

50.2 billion USD, 330 miljarder SEK in May
The trade deficit in the U.S. widened in May to the highest level in almost three years, reflecting a surge in crude oil imports.
The gap grew 15 percent to $50.2 billion, exceeding all forecasts of 73 economists surveyed by Bloomberg News and the biggest since October 2008
Bloomberg 12 July 2011

Imports rose 2.6 percent to $225.1 billion, second only to the record $231.6 billion reached in July 2008.

Excluding petroleum, the trade gap rose to $19.8 billion from $17.5 billion in April.

Exports decreased 0.5 percent to $174.9 billion

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RE: Summary:
Imports 225 billion
Exports 175 billion
Trade deficit 50 billion

The Economic Consequences of the Peak

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The U.S. trade deficit widened in March, to $48.2 billion
Exports grew 4.6 percent to a record $172.7 billion.
Imports grew 4.9 percent to $220.8 billion
as the average price for imported oil hit $93.76 per barrel, the highest since September 2008.
CNBC 11 May 2011

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The Economic Consequences of the Peak

The /US/ petroleum /trade/ deficit decreased in February
as the quantity declined even as import prices continued to rise
Prices will be even higher in March and April
CalculatedRisk 12/4 2011

The trade deficit with China was $18.8 billion (NSA) in February.

The oil and China deficits are essentially the entire trade deficit.

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The Economic Consequences of the Peak

The January US trade deficit increased to $46.3 billion.
Exports rose 2.7 percent to an all-time high of $167.7 billion.
But imports rose a faster 5.2 percent to $214.1 billion.
That reflected a big jump in America's foreign oil bill.
CalculatedRisk March 10, 2011


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A widening trade deficit is bad for the U.S. economy.
When imports outpace exports, more jobs go to foreign workers than to U.S. workers.
CNBC 10 Mar 2011

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US Trade Deficit /$40.6 bn/ increased in December
The first graph shows the monthly U.S. exports and imports in dollar
The second graph shows the U.S. trade deficit, with and without petroleum
CalculatedRisk, February 11, 2011
Higly Recommended

The graph shows the U.S. trade deficit,
with and without petroleum
CalculatedRisk December 12, 2010
Higly Recommended

Click for chart

Oil Prices at End of Oil Era

The trade deficit widened 8.8 percent to $46.3 billion in August
CNN 14 october 2010 with nice chart

China announced a surplus of $16.9 billion for September, down slightly from its $20 billion surplus in August.

U.S. ran up a record-high $28 million deficit with China in August.

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Trade Deficit declines in July
CalculatedRisk on 9/09/2010

Exports rose by 1.8% as US-made goods such as aircraft, industrial machinery and computers proved popular.

Imports dipped 2% as consumer demand for items such as clothing, televisions and toys fell.

The fall in imports reflects the slowdown of the US economy, with consumers and businesses spending less.

The trade figures marked a turnaround from June, when the trade gap had reached a 20-month high.

However, despite July's better numbers,
the trade deficit is running at an annual rate of $495.1bn, 32% higher than the $374.9bn deficit for 2009,
when imports fell significantly due to the global slowdown.

U.S. Trade Deficit Unexpectedly Widens to $49.9 Billion as Exports Decline
- the highest level since October 2008
Bloomberg Aug 11, 2010

The trade deficit in the U.S. unexpectedly widened in June to the highest level since October 2008 as consumer goods imports rose to a record and exports declined.

The gap expanded $7.9 billion, the most since record-keeping began in 1992, to $49.9 billion in June

A $42.1 billion deficit was projected by economists, according to the median forecast in a Bloomberg News survey.

Imports climbed 3 percent, while exports dropped 1.3 percent, the most since April 2009.

Exports from the U.S. decreased to $150.5 billion

Imports increased in June to $200.3

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"The U.S. trade deficit widened unexpectedly"
CNBC 13 July 2010

- The trade gap widened 4.8 percent to $42.3 billion, the largest since November 2008, defying a consensus Wall Street forecast for it to narrow

U.S. imports rose 2.9 percent to the highest since October 2008

A slight drop in the average price for imported oil to $76.93 per barrel helped keep the monthly trade gap from widening further.

2.4 percent rise in U.S. exports

Nice charts
by CalculatedRisk

Rebalancing the world economy

The trade deficit in the U.S. widened in February
increased 7.4 percent to USD 39.7 billion
Bloomberg April 13 2010

Imports climbed 1.7 percent
Exports increased 0.2 percent to $143.2 billion

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The US trade deficit widened in March to the highest level in more than a year to $40.4 billion
May 12 (Bloomberg)

Imports climbed 3.1 percent in March to $188.3 billion, led by a $2.76 billion surge in crude oil and increasing demand for foreign-made automobiles

Exports rose 3.2% to $147.87bn.

The average price of a barrel of crude for the month was $74.32, the highest since October 2008.

Excluding petroleum, the trade gap shrank to $15.6 billion from $16.4 billion in February.

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The US trade deficit fell to USD 37.3 bn
Imports dropped with crude oil imports at their weakest level since February 1999, at 245 million barrels.
Exports fell by $500m to $142.6bn
imports dropped by $3.1bn to $180bn
March 2010

The US trade deficit rose to $40.2bn in December,
10% higher than in November and the largest for 12 months.
BBC 10/2 2010

Exports totalled $142.7bn dollars climbing 3.3%

while imports totalled $182.9bn up 4.8% in December, with oil imports rising to their highest level since October 2008.

But for the whole of 2009, the deficit totalled $380.7bn, the smallest in eight years.

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The trade deficit in the U.S. widened in November to $36.4 billion
Exports increased 0.9 percent, the seventh consecutive gain, to $138.2 billion
Imports increased 2.6 percent, reflecting a jump in oil prices, to 174,6
Bloomberg Jan. 12 2010

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US trade deficit in October $32.9 billion.
Exports were up 2.6 percent,to $136.8 billion
Imports rose 0.4 percent to $169.8 billion.
Bloomberg Dec. 10 2009

A plunge in demand for petroleum checked the gain in imports.

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The monthly trade gap grew to $36.5 billion
The U.S. trade deficit widened in September by an unexpectedly large 18.2 percent,
the most in more than 10 years, as oil prices rose for the seventh straight month and imports from China bounded higher
A separate report showed non-oil import prices up 0.7 percent.
CNBC/Reuters Friday, 13 Nov 2009

Imports grew 5.8 percent in September, while exports rose 2.9 percent.

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The gap between US imports and exports grew 16 percent, in July
the most in more than a decade, to $32 billion

from a revised $27.5 billion in June that was larger than previously estimated
Bloomberg 10/9 2009

Imports rose 4.7% while exports rose 2.2%.

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The U.S. trade deficit in May decreased to $26 bn,
the smallest deficit since November 1999
Bloomberg July 10 2009

Exports rose 1.6 percent, the biggest increase since July 2008, to $123.3 billion,
Imports fell 0.6 percent to $149.3 billion

U.S. demand for imported auto parts was held down in May by production cutbacks and factory shutdowns by Detroit.

The import figures were held down by a decline in oil to $12.9 billion from $13.8 billion

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The U.S. current-account deficit narrowed in the second quarter
to $98.8 billion, the least since 2001
Bloomberg Sept. 16 2009

Foreign earnings on U.S. assets decreased to $116.6 billion from $117.1 billion in the prior three months.

U.S. income on overseas assets, including wages and compensation, decreased to $133 billion from $135.4 billion.

The current-account gap amounted to 2.8 percent of gross domestic product, the lowest since 1991.

The deficit was 6.6 percent of GDP during the last quarter of 2005, the highest level since records began in 1960.

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"Sverige har sedan 1994 visat överskott i bytesbalansen. Det innebär i enkelhet att vi exporterar mer än vi importerar.
Ett annat sätt att se på saken är att vi producerar mer än vi konsumerar.
Klicka här för ett alldeles utmärkt diagram som även visar Bytesbalansen i Sverige, Japan och USA

Underskottet i den amerikanska bytesbalansen uppgick under första kvartalet till 101,5 miljarder dollar.
Analytiker hade räknat med ett underskott på 85,0 miljarder dollar, enligt Bloomberg News snittprognos.
DI 2009-06-17

Bytesbalansen för fjärde kvartalet visade ett underskott på reviderade 154,9 miljarder dollar (-132,8).

Underskottet i handelsbalansen uppgick till 91,2 miljarder dollar under första kvartalet


The U.S. current account deficit
shrank in the first quarter to $101.5 billion, the smallest deficit since the fourth quarter of 2001
Reuters 17/6 2009.

The first quarter deficit equaled 2.9 percent of gross domestic product,
a sharp drop from 4.4 percent in the fourth quarter, and the lowest since 2.8 percent in the first quarter of 1999.

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Min egen gamla spådom är att Euron spricker när dollarn faller, vilket den måste göra för att rätta till underskottet i USA:s handelsbalans.
Rolf Englund 14/6 2009

US trade gap narrows by 28.3 per cent, to $26bn in February
April 9, 2009

Imports dropped 5.1 percent to $152.7 billion
U.S. exports climbed 1.6 percent to $126.8 billion

Non-oil goods imports were down 25% y/y.
Automobile imports are now down over 50% y/y
Brad Setser with nice charts 9/4 2009

The U.S. trade deficit
Imports fell faster than exports, shrinking the gap to $36 billion.
Excluding petroleum, the deficit was little changed at $21.3 billion.
Bloomberg March 13 2009

Treasuries dropped today after Chinese Premier Wen Jiabao said he is “worried” about the country’s holdings of the securities and wants assurances that the investment is safe.
Benchmark 10-year note yields rose to 2.96 percent at 8:39 a.m. in New York from 2.86 percent late yesterday.

Imports slumped 6.7 percent to $160.9 billion

Exports decreased 5.7 percent to $124.9 billion, the lowest level since September 2006, as sales of automobiles, semiconductors, telecommunications gear and drilling equipment dropped

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US Trade gap narrows for 2nd straight year
In 2008, the trade gap narrowed to $677.1 billion,
down from the revised 2007 trade deficit of $700.3 billion.
CNN 11/2 2009

Prior to the past two years of narrowing annual trade gaps, the trade deficit had been on a 16-year upward trend,
starting in 1991, when the annual trade deficit was only $31.2 billion.
During that time, the trade deficit declined only in 2001, a recession year,

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The monthly deficit narrowed 4% to $39.9bn
Imports fell 5.5% to $173.7bn in December. Imports from China were down 11.3%.
US exports also declined, falling 6% to $133.8bn. BBC 11/2 2009

The U.S. trade deficit narrowed in June to 56.8 billion
Imports rose 1.8 percent to 221.2 billion
Exports increased 4 percent 164.4 billion
The deficit with the Organization of Petroleum Exporting Countries expanded by $200 million to a record $18.1 billion.

Comment by Rolf Englund:
But the deficit is still very very large.
55 x 12 = 660

U.S. trade deficit narrowed in May to $59.8 billion
Imports rose 0.3 percent to $217.3 billion
Exports increased 0.9 percent to $157.5 billion


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The U.S. trade deficit widened in April to $60.9 billion
Imports grew to a record $216.4 billion.
Exports climbed to a record $155.5 billion

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US trade deficit in March gap narrowed to $58.2bn
Imports fell by $6.1bn to $206.7bn
Exports fell to $148.5bn.

US trade deficit rose in February to $62.3 billion
Exports rose 2% to $151.4 billion
Imports rose 3% to $213.7 billion
CNN April 10, 2008

Read more at Bloomberg

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The U.S. trade deficit narrowed in december to $58.8 billion
Exports rose 1.5 percent to $144.3 billion
Imports declined 1.1 percent to $203.1 billion

For 2007,
exports of $1,621.8 billion and
imports of $2,333.4 billion resulted in a goods and services
deficit of $711.6 billion

US Trade Deficit grew 9.3 percent, the most in two years,
to $63.1 bn from $57.8 bn in October, Bloomberg

Exports rose 0.4 percent to $142.3 bn

Imports rose 3 percent to $205.4 bn

Read more at Bloomberg

U.S. Trade Gap Widened in October to 57.8 bn
Excluding petroleum, the imbalance was the smallest since 2004.
Bloomberg 2007-12-12

Exports rose 0.9 percent to $141.7 bn

Imports increased 1 percent to $199.5 bn

An increase in shipments of capital goods, including commercial aircraft lled the gain. Boeing, the world's second-biggest plane maker, delivered 28 aircraft to foreign buyers in October, up from 23 in September.

The dollar was down 8.2 percent against a trade-weighted basket of currencies from its biggest trading partners in the 12 months ended in October

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US trade deficit for September dipped by 0.6 percent 56.5 billion
Exports climbed to a record 140.1 billion + 1.1 percent
Imports rose by 0.6 percent to 196.6 billion, the second-highest level on record.
CNN 2007-11-09

Oil imports fell by 0.8 percent to 10.5 billion, an improvement that is likely to be temporary given the recent surge in oil prices to close to $100 per barrel.

Through September, the trade deficit is running at an annual rate of $703.4 billion,
down by 7.4 percent from last year's $758.5 billion.

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The US trade gap fell in June
Imports outstripped exports by $58.1 billion in June
Exports rose 1.5 percent to $134.5 billion
Imports rose 0.5 to $192.7 billion.

The U.S. trade deficit widened to $60 billion in May
LA Times 13/7 2007

Imports rose 2.2% to $192.1 bn

Exports rose 2.2% to $132 bn.

The U.S. trade deficit in April $58.5 billion
Bloomberg 8/6 2007

Exports rose 0.2 percent to a record $129.5 billion
Imports slipped 1.9 percent to /129.5 + 58.5/ $188 billion

Oil imports fell to $24.9 billion, from $25 billion

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U.S. March Trade Gap widened 10.4 percent to $63.9 billion
Imports rose 4.5 percent to $190.1 billion
Exports rose 1.8 percent to $126.2 billion
Bloomberg 10/5 2007

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U.S. February Trade Deficit $58.4 Billion
Imports of goods and services fell 1.7 percent in February to $182.4 billion
Exports fell 2.2 percent to $124 billion
April 13 (Bloomberg)

Bland oraklen på World Economic Forum i Davos i januari var det en fråga som dominerade:
Skulle bostadsbubblan i USA ta kål på högkonjunkturen?
En enda deltagare i världens mest kvalificerade panel, professor Nouriel Roubini, talade om en krasch.
De övriga förutspådde ett nästan lika soligt 2007 som 2006.
Niklas Ekdal, DN signerat 18/8 2007

När rädslan för att låna ut pengar sprider sig får centralbankernas insatser begränsad, eller i värsta fall motsatt, verkan. Regeringar kan inte heller göra så mycket mer än att undvika en politik som blåser upp bubblan extra ifrån början.
Tänkte inte på det, sade Anders Borg, slopade fastighetsskatten.

Full text

Niklas Ekdal


Nouriel Roubini's Blog

Some of the Bears on the web

The Forthcoming Fed Rate Cuts May Not Prevent a US Hard Landing
Nouriel Roubini, Aug 17, 2007

Soft landing

If Nouriel Roubini's recession call is right, the US trade deficit could well fall, not just stabilize, in 2007.
Nouriel though is a real grizzly, not just a bear.
He doesn't believe the world will be able to decouple from the US.
A global slump would cut into US exports as well as US imports
Brad Setser 4/4 2007

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It is rather hard to come up with a novel list of policy changes to support global adjustment.
Brad Setser 28/3 2007


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During January the gap between imported and exported goods fell to $59bn
exports of goods and services rising by 1.1% to a historic high of $126.7bn

The US trade deficit rose 6.5% last year to hit a new record high of $763.6bn
Exports of goods and services rose 12.8% to $1.44 trillion
Imports gained 10.5% to $2.2 trillion
BBC 13/2 2007

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Comment by Rolf Englund:
The problem is that the deficit is so large that the deficit increases even though exports rise considerably faster than imports.
Because the U.S. imports about 50 percent more goods and services than it sells abroad, exports have to grow about twice as fast just to stabilize the deficit.
Read more here


The U.S. trade deficit decreased by 1% to $58.23 billion in October

Exports rose 0.9 percent to $124.8 billion.

U.S. imports rose to $183 billion from $182.47 billion even though oil imports fell.

US Dollar


US will run a $875b deficit for the year 2006 Brad Setser

The US trade gap shrank 8.4 percent in October to $58.9 bn
U.S. imports fell 2.7 percent /to 182.5 bn/ aided by an 11.3 percent drop in the price of imported oil to $55.47
Lower oil imports also more than offset record imports of consumer goods
Exports increased 0.2 percent to a record $123.6 billion
CNBC 12/12 2006

Meanwhile, the politically sensitive trade deficit with China swelled to a record $24.4 billion in October, as imports from that country surged to $29.3 billion, also a record.

US trade deficit at all-time high, 59,9 bn billion
Financial Times 13/10 2006

Exports remained healthy, growing at 2.3 per cent in August against 2.4 per cent for imports,
but with imports starting from a much larger base, the net effect was a widening deficit.

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The U.S. trade deficit at record high $68 billion
as imports reached an all-time high and exports declined for the first time in five months.
Bloomberg et al 12/9 2006

Imports of goods and services rose 1 percent in July to $188 billion.

Exports declined 1.1 percent to $120 billion.

Because the U.S. imports about 50 percent more goods and services than it sells abroad, exports have to grow about twice as fast just to stabilize the deficit.

The Economist 14/4 2005



The US Trade Deficit climbed by just $500m to $63.8bn in May.
This was despite a $4.4bn increase in the deficit on petroleum products

Excluding petroleum, the deficit shrank from $42.3bn to $38.4bn.
BBC 12/7 2006

2.4 per cent increase in exports to $118.7bn
Imports rose 1.8 per cent to a record $182.5bn.


The U.S. trade deficit widened in April to $63.4 billion
Imports rose 0.7 percent to $179.1 billion. Exports fell 0.2 percent to $115.7 billion
Bloomberg 9/6 2006

BBC: The trade gap was $252bn for the year to date, leaving it on course to exceed the record $716bn recorded in 2005.


The U.S. trade deficit soared to an all-time high of $725.8 billion in 2005
The deficit with China hit an all-time high as did America's deficits with Japan, Europe, OPEC, Canada, Mexico and South and Central America.
Fox News 10/2 2006

Imports rose by 12.9 percent to an all-time high of $2 trillion

Exports were up 5.7 percent to a record high of $1.27 trillion.

For December, the trade deficit edged up a slight 1.5 percent to $65.7 billion, the third highest monthly figure on record.

The U.S. trade deficit improved slightly in November but was still the third highest on record
Economists believe that when December figures are included, the final deficit for 2005 will top $710 billion.
Fox News 11/1 2006

The deficit declined by 5.7 percent in November to $64.2 billion after hitting a record of $68.1 billion in October.

But even with the improvement, the trade deficit for the first 11 months of 2005 totaled $661.8 billion, surpassing the previous annual record of $617.6 billion set in 2004.

Economists believe that when December figures are included, the final deficit for 2005 will top $710 billion.

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China's trade surplus more than tripled to $102bn in 2005
BBC 11/1 2006

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Record US trade deficit $856.6bn in 2006
6.5% of US GDP
BBC 14/3 2007

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Top of page

The U.S. current-account deficit widened to a record $225.6 billion last quarter
as the trade gap grew and the country paid more interest to overseas investors.
Bloomberg 18/12 2006

The gap amounted to 6.8 percent of the economy... The deficit reached an all-time high of 7 percent of gross domestic product in 2005's fourth quarter.

On current trends, the US will run a $875b deficit for the year.
Brad Setser 18/12 2006

Offical inflows will finance about $325b of it

And there still will be a $200b gap - "errors and ommissions" - between identified net flows and the financing the US needs.

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The shortfall in investment flows rose to a record of $3.8bn, signalling that an increasing number of US assets are in foreign hands.

The U.S. trade deficit unexpectedly widened to a record $68.9 billion in October
Imports rose 2.7 percent and exports increased 1.7 percent
Bloomberg 14/12 2005

The gap in goods and services trade reported by the Commerce Department today exceeded even the highest estimate in a Bloomberg News survey of economists.

Economists expected the deficit to narrow to $62.8 billion

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BBC: Earlier this week, China announced its own trade surplus was at $90.8bn for the first 11 months of 2005, three times the level of the previous year.

New figures coming out of the US economy confirms that in almost every respect it is doing significantly better than expected. It is impressive.
Carl Bildt blog 6/12 2005



U.S. trade deficit at record high - $66.1 billion
Imports rose 2.4 percent and exports slumped 2.6 percent
Bloomberg 10/11 2005

Imports rose to a record $171.3 billion

Exports slumped to $105.2 billion

Because the U.S. imports about 50 percent more goods and services than it sells abroad, exports have to grow about twice as fast just to stabilize the trade deficit, economists said.


Because the U.S. imports about 50 percent more goods and services than it exports, exports have to grow about twice as fast just to stabilize the trade deficit, economists said.
The U.S. trade deficit widened to $59 billion in August
Bloomberg 13/10 2005

Imports rose 1.8 percent to $167.2 billion.

Exports increased 1.7 percent to $108.2 billion

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The U.S. trade deficit unexpectedly narrowed to $57.9 billion in July
Imports in July fell to $164.2 billion.
Exports climbed to $106.2 billion.

"It's the sunny side to slower consumer spending."
Bloomberg/WSJ 13/9 2005

The value of crude oil imported into the U.S. rose in July to a record $15.3 billion

The price of a barrel of crude oil averaged $49.03.

``As we leave the peak of the business cycle behind, demand for imported goods should start to wane,'' said Ellen Beeson, an economist at Bank of Tokyo-Mitsubishi Ltd. in New York. ``It's the sunny side to slower consumer spending.''

WSJ: The value of crude-oil imports rose to a record $15.30 billion from June's $14.58 billion as the average price per barrel climbed by $4.63 to $49.03. The volume of crude imports dropped to 312.02 million barrels from 328.32 million the previous month. The U.S. paid $20.97 billion for all types of energy-related imports in July, up from $19.93 billion in June.

U.S. Trade Gap Widens as Oil Soars
In June grew 6.1% to $58.82 billion
U.S. imports rose 2.1% to a record $165.65 billion
American exports, at $106.83 billion, showed little growth.
Wall Street Journal 15/8 2005

The price of a barrel of crude oil -- averaging domestic and imported sources on the New York Mercantile Exchange -- rose to $59.03 in July, from $56.42 in June and $49.87 in May,

The rising import bill in July could well mean another big trade-deficit number when the Commerce Department releases its own July report in a month


U.S. exports advanced 3.0%
The U.S. trade deficit widened to $57 billion in April as Americans paid record prices for oil and bought more goods from China
Imports rose 4.1%
10/6 2005

While trade deficits subtract from calculations of economic growth, economists said rising imports also are a sign of healthy demand in the U.S.

Imports rose 4.1% to $163.38 billion

U.S. exports advanced 3.0% to $106.42 billion

The U.S. current account deficit
dropped to $208.7 billion in Q1 from a downwardly revised $223.1 billion in the fourth quarter
Wall Street Journal 16/6 2006

The first-quarter shortfall amounted to 6.4% of gross domestic product, which was last reported at $13.037 trillion in current dollars for the three months ending March 31.

The US current account deficit narrowed in the third quarter of this year because of $9bn of insurance payments in the wake of Hurricane Katrina paid by foreign insurance companies
The deficit was equal to 6.2 per cent of GDP.
FT 18/12 2005

The current account recorded a $195.8bn deficit in the three months ending in September, down from a revised $197.8bn in the second quarter.

The third-quarter deficit was equal to 6.2 per cent of gross domestic product.

The trade deficit was $182.8bn in the third quarter, up from $173.6bn in the third.

The US current account deficit shrank to $195.7 billion from April through June, from a revised record $198.7
The second-quarter deficit is the second-highest ever and twice as much as it was four years ago.
Bloomberg 16/9 2005

At the current pace, the U.S. needs to attract about $2.1 billion a day in investment from abroad to fund the deficit and keep the value of the dollar steady. The deficit accounted for 6.3 percent of gross domestic product, down from a record 6.5 percent in the first quarter.

A drop in government grants of aid and other transfers abroad was more than enough to offset a wider trade gap and the first deficit in income payments since the second quarter of 2002.

The U.S. paid foreigners more income on their holdings of American assets than it received from U.S. investments abroad.

The US current account deficit at record high
$195.1bn in the first quarter of 2005

6.4 % of GDP
BBC 17/6 2005

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“IF SOMETHING cannot go on forever,” said Herb Stein, “it will stop.”
The subject of this now-famous dictum by the late chairman of Richard Nixon’s Council of Economic Advisers was a balance-of-payments crisis stemming from the dollar’s exchange rate, which was then at an unsustainably high level.
Sound familiar?
The Economist 25/5 2005

If something cannot go on for ever it will stop.

... a ballooning current-account deficit in America, an overheating economy in China and a global economy dangerously dependent on American consumer demand, which in turn is dangerously dependent on heavy borrowing and ever-increasing house prices to keep consumers feeling flush.

In rising numbers, at rising volumes, economists have been telling governments that this cannot go on forever.

But when—and how sharply—will it stop?

There is a risk that America's impressive monetary management may be undone by its profligate fiscal policy: government borrowing is helping drive up a current-account deficit that the OECD expects to approach $900 billion by 2006.

Unless they stop spending and start saving, Americans — and the world — remain vulnerable to a sharp correction in the dollar.

Six out of seven of the largest OECD economies last year ran cyclically adjusted budget deficits approaching or exceeding 3% of GDP (Canada is the notable exception). Should export demand dry up, these countries have very little room to use fiscal policy to compensate by stimulating domestic demand.

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The U.S. trade deficit unexpectedly shrank in March to $55 billion
the narrowest in half a year, as imports of consumer goods fell and exports grew to a record.
Bloomberg 11/5 2005

Imports of all goods and services fell in March to $157.2 billion.

Exports rose to $102.2 billion.


Financial Times editorial
Warning: global economic imbalances are getting worse.
The US trade deficit rose to a new record $61bn in February.

This was not supposed to happen.
14/4 2005

Global imbalances were expected to narrow as the economic cycle matured. Instead they are increasing. The International Monetary Fund is worried that this trend will continue, increasing the risk of a sudden adjustment at some point in the future.

The economic argument is familiar. The US current account deficit is not sustainable in the long run. If private investors lose faith that a gradual adjustment is feasible, or foreign central banks stop accumulating US assets, the dollar could fall sharply. This would probably prompt a similarly abrupt rise in US interest rates, which could kill off the US housing and consumption boom and explode over- leveraged financial institutions, with severe global consequences.

Two months ago Alan Greenspan suggested that market forces appeared "poised to stabilise and, over the long run, possibly to decrease" the US current account deficit. The IMF believes the current account deficit will indeed stabilise but at an unsustainable level: about 5.7 per cent of gross domestic product in 2005 and 2006, unless the dollar falls further.

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China increased its foreign reserves by $200bn last year, as it intervened to keep its currency pegged to the depreciating US dollar.


The U.S. trade deficit surged in February to a record $61 billion
driven by a jump in oil prices and imports of Chinese textiles that overwhelmed record exports.
12/4 2005

Imports rose 1.6 percent in February to $161.5 billion

Exports rose 0.1 percent to $100.5 billion


The U.S. trade deficit - Is it good or bad?
The answer to this will be derived by refuting the two most common views of the implications of the trade deficit, the mercantilist and the supply-side view, who are strongly at odds with each other but still both manages to get it wrong
Stefan M.I. Karlsson Mises 21/3 2005

The mercantilist view of the trade deficit is the one held by protectionists of various stripes, including paleoconservatives like Pat Buchanan and Paul Craig Roberts, CNN News anchor Lou Dobbs and the left-wing Economic Policy Institute.

Having seen the fallacy of the mercantilist "trade deficits kills jobs"-theory, does this mean that we should adhere to the supply-side view, taken by among others the aforementioned Dan Griswold, that trade deficits are a non-issue and never a problem? No, it doesn't mean that.
While the supply-side view is closer to the truth, it still neglects that the processes driving trade imbalances are sometimes unsound.

Current account deficits are simply a matter of people in one country on the aggregate borrowing more from foreigners than lending to them. And just as it is sometimes good, sometimes bad for individuals to borrow, so is it sometimes good, sometimes bad for countries to have current account deficits.

If a country has a large current account deficits which reflects a large capital inflow to finance sound investments, then current account deficits are a very good thing, as we have seen in the case of rapidly growing Estonia. But if the capital inflow is used to finance excessive consumption and/or malinvestments then it is a unhealthy thing.

While the U.S. current account deficit does to some extent reflect the more flexible economic structure and accordingly bigger investment opportunities compared to Europe and Japan, it is also to a large extent driven by unhealthy factors created by the U.S. government. This includes of course the budget deficit which has driven down the national savings rate to dangerously low levels and it also includes the low interest rates policies of the Federal Reserve which has been fueling a housing bubble. The excess demand created by these policies have clearly been a factor in pushing up the trade deficit.

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Alan Greenspan and asset price bubbles


The U.S. current account deficit 2004 widened to a record $665.9 billion, equivalent to 5.7 percent of GDP
Bloomberg 16/3 2005

The U.S. current account deficit widened to a record $187.9 billion from October through December, as Americans bought more imports, a government report showed.
The deficit, the broadest measure of trade because it includes financial transfers, followed a $165.9 billion gap the previous three months, the Commerce Department said today in Washington. For all 2004, the deficit reached a record $665.9 billion, equivalent to 5.7 percent of nation's gross domestic product, the most ever.

``The adjustment will not be comfortable'' though it is likely to be ``orderly,'' said Jan Hatzius, a senior economist at Goldman, Sachs & Co. in New York, in a March 11 report to clients.
The dollar will need to drop an additional 15 percent against a broad, trade-weighted index of the country's trading partners in order to help the trade gap narrow, Hatzius said.

Vi /Sverige/ har skaffat oss ett exportöverskott som i bytesbalanssaldo är 6 procent av (BNP).
Läs mer hos Danne Nordling

Kudlow On The Trade Deficit
Mr. Kudlow's rhetoric typifies an ongoing Wall Street, government, and media propaganda effort
that would even amaze George Orwell.
Peter Schiff 11/3 2005

Today, with the release of January's $58.3 billion dollar trade deficit (the second worst monthly result on record), the enormity of the imbalance was once again overshadowed by the rhetoric immediately following its release.

As he has in the past CNBC's Larry Kudlow extolled the virtues of the trade deficit as reflecting America's superior economic growth, while chastising Europe and Japan for not doing their fair share in moving the world's economy forward. In essence, Mr. Kudlow criticized Europeans and Japanese as being economic slackers (because all they do is save money and manufacture products), while praising Americans, who borrow those savings and consume those products, for doing all the hard work.

Give me a break. When asked if he though the fact that Americans were "living beyond their means was a problem" Kudlow's reply was to deny that they were. Apparently, he believes that one's means are merely a function of how much one can borrow. It reminds me of the old joke about the housewife who was amazed to discover that her checking account was overdrawn as there were still unused checks remaining in her book. Further, when asked if he believed that the debt Americans were accumulating was problematic, he assured the television audience that it was not, because "Americans were putting the money to good use." I'm not exactly sure to what good use he is referring, as American's borrow mainly to consume. Imagine trying to convince a banker to loan you money on the grounds that you would put it to good use by buying a big screen T.V. and taking a vacation.
I have addressed these ridiculous arguments many times in the past, but rather than rehashing them, I offer some of my past commentaries in response to similar statements on this issue made by John Snow and Arthur Laffer.

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The Fed Can Print More Money, But It Can’t Print Jobs
Larry Kudlow 10 Aug 2010

Everybody who bought real estate did it with somebody else's money
These guys actually believed that if they bought that house they would make $3 million over the next ten years.
Peter Schiff 16/6 2009


The U.S. trade deficit widened to $58.3 billion in January.
The trade gap was larger than the $56.8 billion economists predicted.
CNBC 11/3 2005

The trade deficit with China hit $1 billion, with exports down 20%, but imports up 1.9%, Reuters reported.
Quite simply, imports grew more than exports as U.S. consumer demand increased. And the trade gap will widen even further as energy prices continue to rise.

"Crude has gone nothing but up since January, so we could very well get (a $60 billion trade gap) next month," Jay Bryson, global economist with Wachovia, told CNBC's "Squawk Box." But as the year goes on, exports likely will stabilize, helped by the weak dollar, and the trade deficit could shrink, Bryson said.

In fact, the current-account deficit has little to do with American profligacy and nearly everything to do with policies that make the U.S. a magnet for foreign capital and faster growth.
housing starts jumped 4.7% in January to a nearly 20-year high
Wall Street Journal editorial 17/2 2005

In his Senate testimony yesterday, Fed Chairman Alan Greenspan declared that "the U.S. economic expansion has firmed," while housing starts jumped 4.7% in January to a nearly 20-year high on an annualized basis.

See also: a simple explanation

US trade gap hits record in 2004
BBC 10/2 2005

The gap between US exports and imports hit an all-time high of $671.7bn (£484bn) in 2004, latest figures show.
The Commerce Department said the trade deficit for all of last year was 24.4% above the previous record - 2003's imbalance of $496.5bn.

The deficit with China, up 30.5% at $162bn, was the largest ever recorded with a single country.
However, on a monthly basis the US trade gap narrowed by 4.9% in December to £56.4bn.

The biggest drop in the price of oil since early 1991 contributed to the narrowing trade deficit. Imported oil cost on average $36.63 a barrel in December, the lowest since August, compared with $41.15 in November. The decrease, along with a lower volume of oil imports, lowered their total value to $11.8 billion from $13.4 billion.


The U.S. trade deficit unexpectedly grew to $60.3 billion in November, the widest ever,
as demand for oil and consumer goods drove imports to a record.
Exports fell.

Jan. 12 (Bloomberg) 2005

Economists expected the deficit to narrow to $54 billion for the month compared with a previously reported $55.5 billion gap in October, according to the median estimate of 70 forecasts in a Bloomberg News survey.

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The U.S. trade gap unexpectedly narrowed in September to $51.6 billion as oil imports fell.
Hurricanes in September that restrained shipments of imported oil may have helped limit the effect of record prices.
Nov. 10 2004 (Bloomberg)

The imbalance with China grew to $15.5 billion, beating the previous high.

Hurricanes in September that restrained shipments of imported oil may have helped limit the effect of record prices. Further increases and a rebound in shipments will probably mean a wider the deficit in October, posing a risk of further declines in the U.S. dollar, economists said.

FT 11/11: Goldman Sachs dismissed suggestions that the improvement in September was due to the hurricanes in the south-east of the US, pointing out that most ports were unaffected. But in a research note published on Tuesday it said the report was unlikely to signal a turning point in the trade deficit.

US deficit:
The problem is a global concern
By Maurice Obstfeld and Kenneth Rogoff
Financial Times November 1 2004

US deficit:
It is not only sustainable, it is logical
By Richard Cooper
Financial Times November 1 2004

US deficit:
It is not only sustainable, it is logical
By Richard Cooper
Financial Times November 1 2004
The writer is professor of economics at Harvard University and a former US undersecretary of state for economic affairs

Suppose that the deficit continues indefinitely at $500bn

Suppose, as is reasonable, the US economy has a trend rate of growth of 5 per cent a year, 3-plus per cent in real terms and 2 per cent inflation or a little less

The current account deficit, while by our assumption constant in dollar terms, will fall steadily as a share of (constantly growing) GDP, reaching 2.2 per cent in 2018, when the ratio of claims to GDP peaks.

Any attempt to reduce the US deficit abruptly, other than through a spontaneous but unlikely surge in domestic investment in many other countries, would undoubtedly produce a world recession.

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Assumptions are scarcely credible
Kenneth S Choie, Financial Times November 6 2004

Sir, Richard Cooper ("How big is the hole in the economy", November 1) says America's current deficit is not only sustainable, it is perfectly logical given the world's hunger for investment returns and dollar reserves. His analysis is so flawed that I suspect he must be promoting a certain political view camouflaged as an economic analysis.

His argument depends wholly on his assumption that the deficit becomes ever smaller relative to the economy. He assumes that the US current account deficit would remain constant in dollars terms, $500bn, while the US economy would grow at 5 per cent in a year in nominal terms. This assumption is plainly unrealistic.

President, Infinity Capital Management, Holmdel, NJ 07733, US

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US deficit:
The problem is a global concern
By Maurice Obstfeld and Kenneth Rogoff
Financial Times November 1 2004
Maurice Obstfeld is professor of economics at the University of California, Berkeley; Kenneth Rogoff is professor of economics at Harvard University and former chief economist of the IMF

We first began publishing papers on the risks of a US current account collapse more than four years ago.

"Perspectives on OECD Capital Market Integration", in Global Economic Integration (Federal Reserve Bank of Kansas City, 2000)

Today it should be problem number one on the new president's international financial agenda. Sadly, we fear it will not be. The winning candidate will probably find it convenient to hide behind one of the proliferating versions of the revisionist theory that there simply is no problem.

According to this seductive view, foreign investors, especially official ones, will never tire of accumulating crisp green dollars.

Besides, even if the current account did close up and the dollar collapsed (by 20-40 per cent, according to our latest analysis**), there would be no need to worry. Global capital markets are deep, and a dollar meltdown would be relatively benign, as in the 1980s.

The Unsustainable US Current Account Position Revisited," NBER working paper 10869

We are very sceptical. When one looks closely at the US twin deficits (current account and fiscal) in the context of open-ended security costs, geopolitical tensions, rising old age pensions, higher energy costs and extraordinarily stimulative macroeconomic policies, we see stronger parallels to the early 1970s than to the late 1980s.

If current accounts are forced towards balance in the context of a difficult global economy, the effects could include financial crises, higher interest rates and a big drop in global output.

Four years ago the US current account deficit stood at 4.4 per cent of gross domestic product, below today's level.

The US current account deficit was arguably financing high investment, although a collapse in private savings also weighed heavily. Today's 6 per cent deficit is larger and is mainly financing government borrowing, a far riskier situation.

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To bring about a substantial reduction in the external deficit without a deep recession, the US needs a huge change in internal relative prices.
About Maurice Obstfeld and Kenneth Rogoff The Unsustainable US Current Account Position Revealed
Martin Wolf Financial Times 1/12 2004

There are many reasons to be concerned about the dollar, but the number one reason is the trade deficit. It is now at $600 billion and rising
I readily acknowledge there are those who say deficits do not matter. In the short term, you can make case for such an argument. But over the long term, I am at a loss to see how you can make such an argument.
John Mauldin, October 29, 2004
Highly recommended

The orgy of tax-cutting, with big revenue losses, continues unabated.
The answer is not tariffs, exchange rate changes or subsidies
The proper way is for the government to consolidate its finances and move deliberately towards running surpluses
Ronald McKinnon, professor of economics at Stanford University, Financial Times 21/10 2004

The orgy of tax-cutting, with big revenue losses, continues unabated. On October 6, House and Senate negotiators approved an expansive tax bill that showers businesses and farmers with about $145bn in rate cuts and new loopholes - on top of what were already unprecedented fiscal deficits. These are principally financed by foreign central banks, which hold more than half the outstanding stock of US Treasury bonds. Moreover, meagre saving by American households is forcing US companies also to borrow heavily abroad.

The upshot is a current account deficit of more than $600bn a year. America's cumulative net foreign indebtedness is about 30 per cent of gross domestic product and rising fast. How will this affect manufacturing? The

In 2003, actual manufacturing employment was just 10.5 per cent of the US labour force, but it would have been 13.9 per cent without a trade deficit in manufactures: the difference is 4.7m lost jobs.

The answer is not tariffs, exchange rate changes or subsidies to manufacturing that further increase the fiscal deficit.

The proper way of reducing protectionist pressure and relieving anxiety about US manufacturing is for the government to consolidate its finances and move deliberately towards running surpluses - in short, to eliminate the US economy's saving deficiency.

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John Maynard Keynes

Herbert Hoover


A Deficit America Can Live With
The American current account deficit is an indicator of the strength and vitality of the U.S. economy.
David Frum, A former special assistant to President Bush for economic speechwriting (2001-2002),
Resident Fellow, American Enterprise Institute, National Post (Canada) October 5, 2004

There's a lot to worry about in this modern world of ours: terrorism, environmental catastrophe, the possibility that a giant meteorite might smack into Earth, knocking us forever into the freezing void of space. So let me as a public service suggest one item you can safely remove from your list: that record-breaking U.S. current-account deficit--of which the trade deficit is the best known component--that has business writers from here to Shanghai hitting their exclamation keys.

The current account tracks the amount of money a country earns from all sources and the amount it spends. It is a statistic that plays on the imagination because it seems to resemble the kind of household accounting we all do. If our families spend more than they earn, we are in trouble--and it just seems obvious that the same must be true for a country as a whole.

If there is one lesson that John Maynard Keynes ought to have pounded into the heads of every amateur economist, however, it is that countries are not households. Countries can spend more than they earn: The United States did so for almost all of the century-plus from 1790 until 1914; Canada has done done so for almost all its record history.

The eagerness of non-Americans to purchase U.S. assets over the past three years underscores a problem that--unlike the current account deficit--actually is worth worrying about: The fact that people in Russia, France, and Japan see so few investment opportunities in their own countries that they would prefer to put their money into something, anything, located in the relatively fast growing United States.

The witty American economist Herbert Stein once quipped, "If something cannot go on forever, it will stop."

A trade deficit of 5.7% of U.S. GDP probably cannot go on forever, and so it will stop, just as the trade deficits of the 1980s stopped. Either the U.S. economy will slow down and import less; or the price of oil will drop and imports will cost less; or the European and Japanese economies will revive and import more; or something will happen to make investment in Europe and Japan less unattractive than it is today.If the world is lucky, those changes will come gradually and smoothly. Or they could arrive with a vicious shock, as they did at the end of the 1990s, when the U.S. stock market and the whole Japanese economy crashed at the same time.

A U.S. recession, for example, would cut the current account deficit. So would a sudden rise in U.S. interest rates. So would a sharp rise in the U.S. dollar. These are all cures far worse than the alleged problem.

But for the U.S. current account deficit, probably the best advice to follow is that which my old boss Bob Bartley of the Wall Street Journal used to offer, before his untimely death: "Stop collecting that damn statistic."

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Comment by Rolf Englund:
But a major part of the capital inflow to the US is not done by investors, but by central banks, mainly in the former Mainland China and Japan.

Stein's Law: If something cannot go on for ever it will stop.


”Det finns en bristande probleminsikt. Inom fem år kan /USA:s/ utlandsskuld nå 50 procent av BNP.
Det skapar en stor sårbarhet för räntehöjningar.
Jag förstår inte hur man kan se underskotten som ett långsiktigt problem”
Cecilia Hermansson, ekonom på Föreningssparbanken
Veckans Affärer nr 43, 18/10 2004, reporter Ragnar Roos

RE: Jag har markerat åren 1991-1992 med rött (för mer om 1992 klicka här)

Vad alla finansministrar världen över bävar för är att denna anpassning inte sker under kontrollerade former. Görs inte tillräckligt för att få ner underskotten kan marknaderna tappa förtroendet och finansiärerna sluta att köpa amerikanska statspapper. Följderna kan då bli dramatiska dollarras och mycket kraftiga ränteuppgångar i USA. Det får i sin tur mycket stora återverkningar världen över, där länder som är starkt beroende av export till USA drabbas hårt. Hela världsekonomin kan då falla hårt i en konjunkturkrasch.

Men i USA väcker inte de dubbla underskotten någon större oro bland ekonomer. Cecilia Hermansson, ekonom på Föreningssparbanken, har nyss deltagit i den ansedda amerikanska ekonomföreningen National Association for Business Economics, Nabe, senaste möte. Hon rapporterar om en avslappnad inställning till obalanserna, långt från den oro som finns på andra sidan om Atlanten.

”De dubbla underskotten diskuterades mycket litet. Man ser det som en långsiktig anpassning. Problemen ska lösa sig när tillväxten ökar omvärlden. Man ser inga dramatiska scenarier framför sig”, säger hon, vilket redan vid tidigare möten med Nabe väckt hennes förvåning. Med sin stora inhemska ekonomi är inte USA så känsligt för växelkursförändringar. Men stora räntehöjningar kan snabbt få allvarliga konsekvenser.


The U.S. trade gap in August rose to $54.04 billion
Markets were expecting a trade shortfall of $51.50 billion
Reuters 14/10 2004

``Obviously, the trade data was not a very good number for the dollar,'' said Larry Brickman, currency strategist at Bank of America in New York. ``Not only did oil contribute to the widening of the deficit, but the non-oil deficit was up as well.

The Sustainability of the US External Imbalances (pdf)
Nouriel Roubini and Brad Setser Research Associate, Global Economic Governance Programme, University College, Oxford
First Draft: September 2004

Nouriel Roubini's Global Macroeconomic and Financial Policy Site (ranked as the #1 Web Site in Economics in the world by The Economist Magazine)

IMF: The question is not whether the US deficit will adjust
- it will - but when and how

BBC 29/9 2004

"The question is not whether the US deficit will adjust - it will - but when and how the adjustment will take place, and in particular whether it will be associated with an abrupt exchange rate adjustment.

"Since current account corrections have historically tended to be associated with a slowdown in growth in the deficit country, even an orderly adjustment carries risk, given the central role that the United States has played in supporting global growth in recent years."

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The risks ahead for the world economy
Fred Bergsten The Economist print edition Sep 9th 2004
Fred Bergsten is director of the Institute for International Economics in Washington. His book, “The United States and the World Economy: Foreign Economic Policy for the Next Administration” is forthcoming.
Very Important Article

US consumer spending rose 0.8% - incomes rose 0.1%
BBC 30/8 2004

US consumer spending rebounded in July, rose 0.8% last month, boosted by car and retail sales. But incomes have risen at a more modest pace than expected, posting a 0.1% increase, the weakest advance since November 2002.

Consumer spending accounts for two-thirds of US economic activity

New Era?

America's dangerous deficit
Since the high and rising US current account deficit is one of the most remarkable features of the world economy, deciding whether it matters is of some significance
Martin Wolf, Financial Times August 24 2004

The argument that deficits are unimportant goes back to Adam Smith's assault on mercantilism in The Wealth of Nations. The aim of economic activity is consumption, he insisted, not the accumulation of treasure. Trade deficits permit a country to consume more than it produces. This then is a good thing.

There are three different reasons why one might still be concerned about deficits:
US savings may fall too low;
the rest of the world may be wasting its capital; and
reversals of capital inflows may destabilise the world economy.

Lawrence Summers, president of Harvard and former US treasury secretary, emphasised the first of these points in his Niarchos lecture to the Washington-based Institute for International Economics.
(The United States and the Global Adjustment Process, March 23 2004)

US savings have reached all-time lows, he noted, as a share of gross and net national product. Net national savings (that is, after allowance for depreciation) are running at about 2 per cent of net national product. In effect, foreigners are now funding close to three-quarters of US net investment.

These low savings impose a constraint on future increases in their standards of living.

This would not have been the case if the rising capital inflow had raised the overall rate of investment. But the counterpart of the higher capital inflows has been higher public and private consumption and so lower savings, not a sustained rise in net (or gross) investment.

The third point is the risk of destabilising reversals of capital flows. One danger does not exist. Since the dollar is the world's key currency and principal reserve asset, US financial liabilities are either denominated in the national currency or are claims on real assets whose prices are flexible. The US cannot suffer from the currency mismatches that have proved so devastating to other countries. That is why the US is the world's borrower of last resort.

Yet the fact that the US offers no hedge against depreciation of the currency exacerbates risks to creditors. They may also conclude that the US would need a sizeable depreciation in the real exchange rate if it had to live with significantly lower capital inflows.

It may well need a sizeable depreciation merely to stabilise the current account deficit, as a share of gross domestic product, given the prospective deterioration in net investment income.

US exports would now need to rise by 50 per cent if they were to equal imports.

If the relative prices of exports were to fall as well (that is, the terms of trade were to deteriorate), the increase in the volume of exports needed to balance trade would be still larger.

Full text

The US Current Account Deficit and the Euro Area
Edwin M. Truman, Institute for International Economics July 2, 2004

Edwin M. Truman is a senior fellow at the Institute for International Economics in Washington, DC. He served as Assistant Secretary of the U.S. Treasury for International Affairs from December 1998 to January 2001. Before joining the U.S. Treasury, he was Director and later Staff Director of the Division of International Finance of the Board of Governors of the Federal Reserve System beginning in June 1977.

1. Is the US current account deficit sustainable?
No, but the extent and timing of its adjustment are uncertain.

2. How will the adjustment take place?
Through a combination of substantial changes in exchange rates; a modest, largely endogenous slowing of US growth; and, it is to be hoped, some acceleration of domestic demand in the rest of the world.

3. What are the implications for the euro area?
It is likely to have to absorb more than its proportionate share of the adjustment.

When I left the Federal Reserve in 1998, when the US current account deficit was 2.3 percent of US GDP, the staff had concluded that deficits on that scale were not sustainable indefinitely. Six years later, the deficit is twice that size and not likely to narrow significantly over the next two years.

Full text

America on the comfortable path to ruin
These two facts - the rest of the world's surplus output and the US goal of full employment - explain the global macro-economic picture
Martin Wolf, Financial Times, August 18 2004
Very Important Article


Concern over the softening of global economic expansion heightened on Friday with data showing the US trade deficit at new record levels, lack of vigour in Europe and an abrupt slowdown in growth in Japan
Economists said the figures showed the world was still relying on US consumer demand, with other big economies unable to generate sustained increases in demand at home.
Financial Times 13/8 2004

The trade figures imply that US second-quarter growth will be revised downwards, along with forecasts for the rest of the year.

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BBC: The US trade deficit has unexpectedly swollen by 19% to a record $55.8bn in June
BBC 13/8 2004

The country suffered the biggest drop in exports in nearly three years, just as imports hit record levels.

Wall Street economists had expected the gap to widen, but had predicted a gap of just $47bn.

Full text

The vigour of America's expansion is once again in doubt
Is America's economy in trouble? With oil prices hitting new highs of over $45 a barrel this week, and with the latest figures showing a measly 32,000 new jobs created in July, the question is fraying nerves on Wall Street and in the White House.
The Economist 12/8 2004

Pessimists disagree on several counts. Many argue that America's expansion was always a lot less robust than it seemed, and highly dependent on monetary and fiscal stimuli. With interest rates heading higher and no more tax cuts in sight, the debt-laden consumer, argue the Cassandras, was bound to pull back from his spending binge, particularly when the jobs market is so lacklustre.

Even if the economy looks reasonably robust, oil at $45 a barrel and possibly heading higher is a serious cause for concern.

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US current account deficit widens to $1.5bn a day
Financial Times June 18 2004

The US current account deficit widened to $144.9bn in the first quarter - a record in dollar terms, and a sharp rise from the $127bn deficit in the fourth quarter of 2003.

At current levels, the US needs to attract more than $1.5bn of net investment per day from abroad to cover the current account shortfall.

The deficit of $136.9bn in trade in goods and services accounts for the lion's share of the imbalance, and the increase from the $125.5bn trade deficit in the fourth quarter accounts for more than half the deterioration - in part reflecting the higher cost of energy imports.

Foreign-owned assets in the US increased by $447.6bn in the quarter.

As demand for US assets among foreign private investors has waned, overseas official purchases of US Treasuries have filled the gap, led by Asian economies intervening to prevent their currencies rising against the dollar. Foreign central banks spent $125.2bn on US assets in the quarter.

Americas trade gap is growing again.
Worse, it may be extremely hard to close it without causing much economic pain - and not just for Americans
The Economist 22/6 2004

America is refusing to let go of the baton. It continues to import much more than it exports while investing more than it saves.

The current-account deficit, having narrowed to 4.6% of GDP at the end of last year, has widened again in the first quarter of this year to 5.1% of GDP.

Full text

The US trade deficit grew 3.8% to hit a fresh record of $48.3bn in April
BBC 14/6 2004

The trade gap widened because of high oil prices and the recovering US economy's appetite for imported goods.

Imports rose 0.2% in April to $142.3bn, while exports failed to live up to expectations, sinking 1.5% to $93.9bn.

The trade deficit took economists by surprise as many had expected it to shrink slightly after hitting a record in March. They had expected growth in the world economy to lead to more export sales for US firms.

The consensus among economists was for April's trade gap to shrink to just under $46bn, according to a Reuters poll.

The US trade deficit widened to a record $46 billion in March
from $42.1 billion in February, due to the highest oil import prices since 1983 and strong demand from the growing U.S. economy.
Economists were expecting the deficit to widen to $43 billion, according to
CNBC 12/5 2004

Economists had hoped the fall in the dollar of nearly 30 per cent since its 2001 peak would help close the ballooning US trade gap.

A shoppers' binge on overseas goods was largely responsible for the rise, with total imports of consumer goods rising by $2.6bn to $31.3bn. "This reminds us that the US consumer remains the main locomotive of the world economy," said Nigel Gault, head of US economic research at Global Insight, the consultancy. "But the price of this is growing imbalances in the world economy." FT 13/5

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The U.S. trade deficit widened to a record $43.1 billion in January
Exports fell 1.2 percent, the biggest drop since August, and imports were the second highest on record
March 10 2004 (Bloomberg)

Berkshire Hathaway, the insurance and holding company run by legendary investor
Warren Buffett, amassed a record cash pile of $36bn in 2003 as the world's second-richest man once again shied away from rising stock markets
In particular, he singled out the weak dollar as a cause for concern and revealed that Berkshire Hathaway had $12bn invested in foreign currencies to balance its exposure to the falling greenback.
"Prevailing exchange rates will not lead to a material letup in our trade deficit.
Financial Times 8/3 2004

"Our capital is underutilised now...It's a painful condition to be in - but not as painful as doing something stupid," added Mr Buffett.

Mr Buffett also highlighted a number of risks to the US economy that add to last year's warnings on derivatives, mutual funds and corporate governance. In particular, he singled out the weak dollar as a cause for concern and revealed that Berkshire Hathaway had $12bn invested in foreign currencies to balance its exposure to the falling greenback. "Prevailing exchange rates will not lead to a material letup in our trade deficit. So whether foreign investors like it or not they will continue to be flooded with dollars," said Mr Buffett. "The consequences of this are anybody's guess. They could, however, be troublesome - and reach, in fact, well beyond currency markets."

Read more here

The US january trade deficit widened by more than expected, from $38.4 to $42.5bn
Overall in 2003, exports totalled $1,018bn and imports reached $1,507bn, giving a deficit in goods and services deficit of $489.4 billion, $71.3 billion more than the 2002
Financial Times 13/2 2004

The US trade deficit with the rest of the world widened by more than expected last month, disappointing hopes that the fall in the dollar was starting to lead to a narrowing of the gap. The deficit rose from $38.4 to $42.5bn - compared to analysts' expectations of a more modest increase to $40bn.

Exports of goods and services actually declined by 0.2 per cent or $200m to $90.4bn. This was despite the fact that the dollar declined by 3.3 per cent on a trade-weighted basis during the fourth quarter, and close to 2 per cent during January.

Imports rose by 3 per cent during December from November to $132.8 billion. This left imports 7.7 per cent higher on the year. The fact that import prices rose by a surprisingly large 1.3 per cent in January, suggests the deficit may even start to widen before it contracts - as the import bill swells.

Overall in 2003, exports totalled $1,018bn and imports reached $1,507bn, giving a deficit in goods and services deficit of $489.4 billion, $71.3 billion more than the 2002.

Euron spricker när dollarn faller
Rolf Englund i EU-krönika i Nya Wermlands-Tidningen 2001-01-08

The US current account deficit was $135bn - in the third quarter
Financial Times 16/12 2003

The US current account deficit, a broad measure of US trade with the rest of the world, was $135bn in the third quarter, just ahead of a forecast for $136bn.

Foreign purchases of US assets jumped to $27.7bn in October after collapsing to $4.2bn in September, the weakest inflow for five years.

However, the inflow was well below the monthly average of more than $60bn from the first eight months of the year, and also below $45bn, the minimum level needed to fund the current account deficit.

The dangers of the dollar's decline
Current account deficits and deflationary pressure are being shifted from the US towards other high-income countries. Among the most endangered is an already feeble eurozone
Martin Wolf, Financial Times December 17 2003
Very Important Article

America's trade deficit has hit a new record annual high of $490.8bn.
BBC 12/12 2003

The figure, much worse than last year's $418.04bn, comes after October's rise of $41.77bn - the highest since March. Although expected, the latest increase is bad news for President George W Bush, as it follows 40 straight months of jobs losses in manufacturing.

A fall in the dollar was "unavoidable", Mr Duisenberg said in an interview
But he "prayed" it would be gradual.

Financial Times 6/10 2003

Mr Duisenberg appeared unrestrained as he prepared to make way for Jean-Claude Trichet, the Bank of France governor, to succeed him at the ECB next month. Clearly referring to the Japanese yen, Mr Duisenberg said the euro should not be the only currency to support the dollar's decline.

"The dollar is the currency of a country with a huge deficit on its balance of payments, close to 5 per cent of its GDP . . . You can afford this one year, two years, maybe five years, but some time there has to be an adjustment of its currency," he said.

"We hope and pray that this adjustment, which is unavoidable, will be slow and gradual. We will do everything in our power to make it slow and gradual. Until now, the adjustment is only against the euro."

excessive reliance on America is also the biggest problem facing the global economy today.
As Lawrence Summers, Treasury secretary under Bill Clinton, once put it: “The world economy is flying on one engine.”
Sep 18th 2003 From The Economist print edition

The statistics are startling. Since 1995 almost 60% of the cumulative growth in world output has come from America, nearly twice America's share of world GDP. America's disproportionate contribution to global growth reflects an extraordinary rise in American spending. Domestic demand in America has risen, on average, by 3.7% a year since 1995, twice the pace of the rest of the rich world.

Just as flying on one engine is inherently risky, so a one-engined world economy is more likely to crash. Global prosperity depends overwhelmingly on American demand. If it were to drop significantly, the world would tumble into recession. Yet for years Americans have been spending far beyond their means.

America's national saving rate is at an all-time low. The country's current-account deficit—in effect, the amount it must borrow annually from foreigners to spend more than it produces—has been rising fast, and is now running at over 5% of GDP, a historic high (see chart 2). As a result, the United States, which as recently as 1980 was the world's biggest creditor country, has now become the world's biggest debtor country.

This survey will argue that the world cannot continue indefinitely to rely on American spending. The chances are that Americans themselves, weighed down by the burden of high debts, will eventually start to save more. But even if they do not, foreigners will become increasingly unwilling to fund American spending.

During the 1990s boom, it was American firms that powered the global economy with a huge debt-financed investment spree. But after the stockmarket crashed in 2000, investment spending collapsed as firms tried to strengthen their balance sheets.

Total spending has kept going in part because American households have yet to make that adjustment. They, too, spent beyond their means during the 1990s bubble but carried on after the bubble burst, thanks to sharp cuts in interest rates that allowed them to borrow against their homes. American consumers' indebtedness is currently growing twice as fast as their incomes.

Increasingly, America's spending has also been fuelled by the government. The federal budget has shifted from a surplus of over 2% of GDP in 2000 to a deficit of over 4% of GDP this year. But ever bigger budget deficits will not be able to compensate forever if private spending flags.

Moreover, borrowing from abroad at an accelerating rate can go on only for so long. Eventually the interest on the debt will become too onerous. Long before then, however, foreigners will become reluctant to provide the necessary capital. Already the share of America's current-account deficit that is funded by private foreign investors has fallen. It is Asia's central banks – mainly Japan's and China's—that are picking up an ever bigger share of the tab by buying huge quantities of American government bonds.

In the past three years almost 3m jobs have been lost in American manufacturing, one out of six in that sector. With a presidential election due in 2004, demands for action against China are multiplying. Either Asia's currencies will have to adjust, or America will retreat from free trade. On both political and economic grounds, it seems, the world's reliance on one engine is reaching its limit.

Given their economic size, the euro zone, especially Germany, and Japan remain the most likely back-up motors for the global economy. But these economies are in a mess. Both regions are having to cope with a worrying combination of ageing populations (which tend to dampen spending) and structural rigidities (which slow down growth). In recent years, both have also suffered from extraordinarily incompetent macroeconomic policies.

Japan, the world's second-largest economy, has had an abysmal decade of deflation and stagnation, brought on by its government's inability to deal with the aftermath of its own asset bubble in the 1980s. In Europe, an obsession with tight macroeconomic policy has exacerbated the recent economic downturn.

With no alternative engines ready to kick in, the dollar will have to play an even more important role in America's adjustment than it did in the 1980s, when it fell by 55% against the D-mark and 56% against the yen. Since its peak in 2002, the dollar has already fallen by a total of 8% against its trading partners. But that is nowhere near enough.

Many economists reckon that, in the absence of a shift in global demand patterns, it would need to fall by 40% or more to make a serious dent in America's current-account deficit. That kind of depreciation is hugely risky. The more a currency falls, the greater the danger that it will fall too far, too fast. A sudden dollar crash could roil financial markets and plunge the world into recession.

Moreover, the dollar is unlikely to fall evenly against other currencies. The Asian central banks' determination to stop their currencies rising has, so far, concentrated the dollar's fall on the euro, with a 20% drop against the European currency since early 2002 compared with 8% overall. A further, even bigger drop in the dollar, targeted on the euro, would probably sink Europe's economies.

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Washington, Feb. 20 2003 (Bloomberg) -- The U.S. trade deficit unexpectedly widened to a record in December as Americans bought more foreign-made cars and other consumer goods than ever before, a government report showed.

Exports declined.

The $44.2 billion trade gap in goods and services surpassed the previous record of $40 billion in November, the Commerce Department said.

For all of 2002, the deficit reached $435.2 billion, the highest ever, compared with the previous high of $378.7 billion in 2000.

Dec. 12 2002 The dollar fell for a fourth day in five on speculation
the U.S. current-account deficit will hurt efforts to revive the economy and attract foreign investment.

The shortfall in the current account - bytesbalansen, which includes trade and income on investments, means the U.S. needs almost $1.4 billion a day in foreign capital to sustain the dollar's value.

Japan and the 12-nation euro region have account surpluses.

``This massive need for foreign investment is not a good recipe for growth,'' Stephen Roach, the chief economist at Morgan Stanley told Bloomberg Television.
``Over the next year or so the dollar is going to make a pretty determined descent.''

The Developing U.S. Recession and Guidelines for Policy
by Wynne Godley and Alex Izurieta

Handelssiffror sänker dollarn
DI, 2002-06-20

ECB-chefen varnar för USA-underskott
DN 2002-05-02

I dont care about the current-account deficit, Mr. O´Neill

IMF once again warned
Wall Street Journal 2002-04-19

The IMF once again warned that problems in the U.S. -- the massive current-account deficit, the low personal-savings rate, and overvaluation of the dollar -- could lead to violent world financial-market shifts. Further, high levels of corporate and household debt in the U.S. and a number of other countries could eventually restrain spending and investment.

Full text of article

IMF World Economic Outlook, april 2002

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Dollar slides lower across the board
Financial Times April 18 2002 09:55

Euron spricker när dollarn faller
Rolf Englund i EU-krönika i Nya Wermlands-Tidningen 2001-01-08

An unsustainable black hole
(The US current account deficit)
Martin Wolf
Financial Times, February 27 2002
RE: A difficult, but a state of the art article - highly recommended

Spend now, pay later
Ronald McKinnon
Financial Times, Personal View, February 5 2002
The writer is professor of economics at Stanford university

Eventually, the current account deficit will have to be restrained
Remarks by Chairman Alan Greenspan

March 13, 2002

Fast track to trade deficits
EPI Issue Brief #170

Interim Report: Notes on the U.S. Trade and Balance of Payments Deficits
Wynne Godley

Global fault lines
Barry Riley, Financial Times, April 28, 2001

Warning: A Splurging America Is Borrowing Trouble
Franco Modigliani and Robert M. Solow

The International Herald Tribune, April 10, 200
The writers are Nobel Prize winners in economics. They contributed this comment to The New York Times.

It’s not the end of the world
Martin Wolf, Financial Times, December 13 2000

Risking a hard landing
Martin Wolf
, Financial Times, December 6, 2000

The Developing U.S. Recession and Guidelines for Policy
by Wynne Godley and Alex Izurieta

The United States should now be prepared for one of the deepest and most intractable recessions of the post-World War II period, with no natural process of recovery in prospect unless a large and complex reorientation of policy occurs both here and in the rest of the world.

The grounds for reaching this somber conclusion are that very large structural imbalances, with unique characteristics, have been allowed to develop. These imbalances were always bound to unravel at some stage, and it now looks as though the unraveling is well under way.

There may be no spontaneous recovery because the unraveling that has started is a reversion toward what, in the relevant sense, is a normal situation. This consideration leads us to take issue with some distinguished commentators, such as Alan Blinder (2001) and Laura Tyson (2001), who apparently assume that because a spontaneous recovery will occur relatively soon, any fiscal relaxation should be temporary.

The general predicament is made worse by a deteriorating world economy; U.S. exports fell sharply in the first seven months of 2001, when the balance of payments was already heavily in deficit.

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Handelssiffror sänker dollarn
DI, 2002-06-20

Dollarn tappade mark efter att handels- och tjänstebalansen stigit till 35,9 miljarder dollar i april, vilket var klart över förväntningarna på minus 32,2 miljarder dollar.

Dollarn, som på senare tid försvagats på ett sämre sentiment för den amerikanska ekonomin, tappade från strax under 0:96 till 0:9625 mot euron i en initial reaktion. Mot yenen tappade dollarn till 123:50 från 123:75.

Dollar/euron handlas därmed på sin högsta nivå sedan i juni 2000. Euron har därmed också lyckats bryta igenom en teknisk nivå strax under 0:96 mot dollarn som även testades i januari 2001.

Även bytesbalansen i USA för första kvartalet kom in sämre än väntat, med ett underskott på 112,5 miljarder dollar mot väntade -108,0, vilket också tyngde dollarn.

Euro soars on record US trade gap
BBC, 20 June, 2002, 19:26 GMT

News of a record US trade deficit has propelled the European single currency to a two-year high against the dollar.

The euro rose from $0.9574 late on Wednesday to $0.9645 on Thursday, its strongest showing since June 2000.

The single European currency's new-found strength stemmed from figures showing that the US current account deficit had mushroomed to a record $112.5bn in the first three months of the year.

The higher current account deficit - which shows that more money is leaving the US in the form of foreign investments and spending on imports than is coming in - suggests rising demand for foreign currencies, undermining the dollar.

Investors shun US shares

"If the market ever needed convincing the US dollar is overvalued, it received it in spades this morning," said Sal Guatieri, economist at the Bank of Montreal.

The latest figures came in ahead of most analysts' forecasts, and marked an 18.3% increase on the current account gap for the last three months of 2001.

The rise in the first quarter current account deficit was fuelled partly by a sharp fall in spending on US shares by private foreign investors, reflecting concerns over the earnings prospects of US corporations.

Separate figures showed that the US trade deficit in goods and services for April widened to $35.9bn, itself a new monthly record.

The April trade deficit - which measures spending on goods and services, but excludes financial flows from stock and bond purchases - partly reflected an increase in spending on oil imports.

The US trade deficit with Japan grew to $6.8bn from $5.71bn in March, while the shortfall with the European Union widened to $5.14bn from $4.42bn.

Full BBC text with links

Few have realised the most dangerous feature of Emu:
it has locked Germany into a seriously uncompetitive real exchange rate

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ECB-chefen varnar för USA-underskott
DN 2002-05-02

Det växande underskottet i USA:s bytesbalans är ohållbart och utgör en risk för hela världsekonomin. Den varningen utfärdade Wim Duisenberg, chef för Europeiska centralbanken, ECB, när han på torsdagen meddelade att centralbanken tills vidare lämnar sin styrränta oförändrad på 3,25 procent.

- På lång sikt anser jag att USA:s bytesbalansunderskott på över 4 procent av BNP är ohållbart. Det utgör en risk för hela världsekonomin, sade Wim Duisenberg utan att vilja precisera på vilket sätt denna risk skulle realisera sig.

Euron spricker när dollarn faller
Rolf Englund i EU-krönika i Nya Wermlands-Tidningen 2001-01-08

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Apr 22nd 2002 From The Economist
Besides oil prices, the IMF is also concerned about America’s huge current-account imbalance, as goods and capital flow into the world’s largest economy. This is bound to unwind at some point—say some economists—and when it does the adjustment is bound to be a painful one.

Others respond by pointing out that this deficit has persisted for twenty years or so, with few obvious signs of harm either to America or to the rest of the world. Indeed, the fact that America has been a net importer of capital helped fuel the investment boom of the late 1990s, which in turn helped America act as the engine of world growth.

The IMF may be concerned, but the American government is not, and the subject was not discussed by the G7 ministers. According to America’s Treasury secretary, Paul O’Neill, this was because other finance ministers did not want to hear his well-known views on the subject yet again.

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I dont care about the current-account deficit, Mr. O´Neill

Rodrigo Rato, the European Unions economics chief, came here ready to lecture Treasury Secretary Paul ONeill on the dangers of the huge U.S. trade gap.

The current-account deficit is one of the U.S. imbalances that constitute risks to the global economy, according to Mr. Ratos notes. Everyone in the room knew the Treasury secretary is one of the very few top economic officials who, instead of seeing the U.S. trade gap as a disaster waiting to happen, genuinely believes it just doesnt matter. They know that I have strong thoughts about this, and they know what they are, Mr. ONeill said after meeting with Mr. Rato and the G-7 ministers.

The U.S. trade gap was one of several issues in the air this weekend as economic officials and antiglobalization protesters alike gathered for the semiannual meetings of the International Monetary Fund and World Bank.

Mr. ONeills approach to debt crises, like his view of the current account, reflects his business-minded approach to international economic policy. The Treasury secretary, who was the chief executive of Alcoa Inc., is a maverick who portrays broad economic issues as the sum of the individual management decisions of corporate executives.

He refers to exchange rates-a life-or-death variable in the eyes of many traders and manufacturers-as a minor, third-order issue. And he has prodded his G-7 counterparts to spend less of their time together on bureaucratic rituals; his staff squeezed the margins on this weekends G-7 closing communiqué because the secretary had said it shouldnt exceed one page.

But nowhere are his views more heretical to mainstream economists than in regard to the trade gap. The current-account deficit-the broadest measure of the U.S. foreign-trade gap-reached an astounding $417 billion in 2001, or 4% of the nations gross domestic product, despite a brief recession that trimmed the flow of imports.

Morgan Stanley predicts that next year it could reach 6% of GDP, which is the total value of goods and services produced in a nation.

IMF Chief Economist Kenneth Rogoff said history suggests that when countries run sustained current-account deficits up in the range of 4% and 5% of GDP, they eventually reverse, and the consequences, particularly in terms of the real exchange rate, can be quite significant.

Most economists would say a trade deficit is akin to credit-card debt.

The U.S. imports more than it exports, and in order to cover the difference it borrows money overseas. Foreign investors-Japanese insurers, European manufacturers and the like-put their money into American stocks, bonds, property and companies. But at some point, the argument goes, investors wonder whether they will get their money back and grow wary of lending ever-increasing amounts to the U.S.

Even Federal Reserve Chairman Alan Greenspan has intimated that the U.S. cant expand its borrowing forever.

In the nightmare scenario, foreigners would pull their money out, causing the dollar to start sinking and stock markets to plunge. Americans would have to pay higher interest rates and the U.S. economy would lurch to a halt.

We are at a point where if the current account continues to widen, we could well have a balance-of-payments funding crisis, said Stephen Roach, chief economist at Morgan Stanley. And the Treasury secretary is really missing the mark if he doesnt see that.

Mr. O'Neills predecessor at Treasury, economist Lawrence Summers, played down the immediate threat. But he considered it a potential long-term risk and argued it would be better if the deficit shrank due to more U.S. exports rather than a slow economy and fewer imports.

Mr. ONeill looks at the question as a business executive. The deficit, he says, exists simply because foreigners want to invest their money in the U.S. more than anywhere else. The cash pours into American assets, pushing the dollar up and making imported goods and services more attractive to Americans.

I dont care about the current-account deficit, Mr. ONeill said during a recent trip to Europe. The money goes where people think it will be well-treated. As long as U.S. companies are more productive than their competitors, investments in the U.S. will offer a superior long-term return, he argues.

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IMF once again warned
Wall Street Journal 2002-04-19

The IMF once again warned that problems in the U.S. -- the massive current-account deficit, the low personal-savings rate, and overvaluation of the dollar -- could lead to violent world financial-market shifts. Further, high levels of corporate and household debt in the U.S. and a number of other countries could eventually restrain spending and investment.

Full text

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Dollar slides lower across the board
Financial Times April 18 2002 09:55

The dollar weakened across the board on the foreign exchange markets on Thursday, rekindling hopes among long-standing bears that the US currency might finally be poised to fall sharply.

There was no immediate catalyst for Thursday's move in the dollar, which took it below Y130 for the first time in a month. But analysts have become increasingly concerned at the inability of the dollar to rise following strong economic data. This weak trading pattern has traditionally been associated been associated with the euro.

Although the US appears to be leading other countries out of recession, doubts have recently been mounting about the vigour of US recovery. The downturn in US growth last year was too brief to resolve serious structural imbalances in the US - including the low savings ratio and the ballooning current account deficit. Many fear that these imbalances will soon start to constrain growth.

Jim O'Neill, head of economics at Goldman Sachs, said the current account deficit in the US could be heading for 6 per cent of GDP.

"The current account deficit is becoming more of a burden, especially at a time when the outlook for returns on US assets is less compelling than previously," said Mr O'Neill.

Goldman Sachs also argues that the increasing dependence on overseas purchases of corporate bonds to fund the current account deficit is becoming a problem. "The result has been that the current account has become more expensive to service and the investment account deficit is running at 1 per cent of GDP," said Mr O'Neill.

After so many disappointments, dollar bulls are reluctant to call a turn in the dollar. But Mr O'Neill said the US currency was now looking very vulnerable.

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Not Easy, The Economist 2000-12-14:
The latest current-account figures are a sharp pre-Christmas reminder that engineering a slowdown, significant enough to have some impact on America’s burgeoning trade and financial deficit with the rest of the world, while avoiding outright recession, will not be easy.

Full text at The Economist

Samuel Brittan: Watch the dollar, not the euro
Financial Times, October 12
The biggest flaw in the world economy is the US current account deficit, which could place a strain on the currency

Is Ballooning U.S. Trade Gap Taboo?
By Reginald Dale
International Herald Tribune September 19, 2000

Opening Statement Of Representative James A. Leach
Chairman, Committee on Banking and Financial Services

Hearing on the Conduct of Monetary Policy, July 25, 2000

Testimony of Chairman Alan Greenspan
The Federal Reserve's report on monetary policy Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate July 20, 2000.
Chairman Greenspan presented identical testimony before the Committee on Banking and Financial Services, U.S. House of Representatives, on July 25, 2000

Unbalanced economy
FT editorial, April 13, 2000

Europe's illusion about America's weakness
Gerard Baker, FT, 2000-03-28

Gunnar Örn: USA kraschlandar inom ett år
DI 1999-11-15

A miraculous error
Martin Wolf, FT, September 29 1999
The Federal Reserve inadvertently allowed unsustainable growth in the US, but this helped to offset the collapse of demand elsewhere and avoid deep world recession

A time for wizardry
John Plender, FT, August 21 1999

The great American public still has the spending bit between its teeth. That much is clear from the surge in imports that made such a signal contribution to this week's awful US trade figures.

Tax Cuts: Bad for The Market
By Henry Kaufman
Washington Post, August 11, 1999

ERNEST H. PREEG: The deficit trap
Ernest H. Preeg is a senior fellow at the Hudson Institute in Washington
FT, August 5, 1999
The US current account deficit could reach a record $350bn this year, the 18th deficit in a row. The accumulation of deficits means the US is likely to be a net debtor to the tune of $2,000bn early in the next decade, despite having been a $350m net creditor in 1980.

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Why the U.S. International Financial Position Is Not Sustainable by Robert A. Blecker

World's bankers warning on US economy
BBC, June 7, 1999

IMF, April 1999: Fears of a hard landing in the US have been fuelled in part by the experiences of Japan, Finland, Sweden and the UK following similar periods of falling net savings in the 1980s. To assess the possible impact, the IMF examines a scenario in which the household saving rate rises in response to a 30 per cent fall in share prices, with markets overseas dropping by 15 per cent as a result.

SEBs Ekonomiskt perspektiv nr 2 1999: " Sverige växlar upp år 2000. USA går starkt även i år och landar mjukt 2000. Europas svacka blir kort."

Testimony of Chairman Alan Greenspan U.S. Senate February 23, 1999

Professor Tim Congdon i Lombard Street Research Monthly Economic Review, July 1988

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Eventually, the current account deficit will have to be restrained
Remarks by Chairman Alan Greenspan
March 13, 2002

During the past six years, about 40 percent of the total increase in our capital stock in effect has been financed, on net, by saving from abroad. This situation is reflected in our ongoing current account deficit, which, by definition, is a measure of our net investment in domestic plant and equipment financed with foreign funds, both debt and equity.

But this deficit is also a measure of the increase in the level of net claims, primarily debt claims, that foreigners have on our assets. As the stock of such claims grows, an ever-larger flow of interest payments must be provided to the foreign suppliers of this capital. Countries that have gone down this path invariably have run into trouble, and so would we.

Eventually, the current account deficit will have to be restrained. The nation's economic potential will be brighter if that comes about through an increase in domestic saving rather than a reduction in domestic investment.

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Fast track to trade deficits
EPI Issue Brief #170

EPI was founded by a group of economic policy experts that includes Jeff Faux, EPI president; economist Barry Bluestone of the University of Massachusetts; Robert Kuttner, columnist for Business Week and Newsweek and editor of The American Prospect; Ray Marshall, former U.S. secretary of labor and professor at the LBJ School of Public Affairs, University of Texas-Austin; Robert Reich, former U.S. secretary of labor and professor at Brandeis University; and economist Lester Thurow of the MIT Sloan School of Management.

The Bush Administration is proposing to put trade agreements on a “fast track,” a procedure that would bar Congress from making any amendments, and thereby make it easier to negotiate a Free Trade Agreement of the Americas (FTAA) and a new round of trade concessions with the World Trade Organization (WTO).

Much of the debate about FTAA and the WTO has centered on whether workers and the environment should be accorded the protections these agreements now give to investors. Largely ignored, however, is a fundamental economic concern —the connection between U.S. trade policies and the unsustainable trade deficits that have followed in their wake.

Yet no one disputes that, for the past quarter century, Americans have been buying more from the rest of the world than they have been selling. Despite assurances that trade expansion under the North American Free Trade Agreement (NAFTA) and the WTO would reduce the trade deficit, the gap between imports and exports has ballooned.

Last year it drove the U.S. current account deficit (the total of all international financial transactions) to a record $450 billion, or 4.5% of gross domestic product.

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Spend now, pay later
Ronald McKinnon Financial Times, Personal View, February 5 2002
The writer is professor of economics at Stanford university

In spite of the similarities between the Bush and Johnson fiscal shocks, history is unlikely to repeat itself. Circumstances today are different. In the late 1960s, when fiscal loosening became inflationary, the Federal Reserve accommodated it rather than risk disinflation and the increased unemployment that this was thought to bring. Today, if inflation threatens, Alan Greenspan can be counted on to raise interest rates vigorously.

But if inflation is unlikely, what other impact may Mr Bush’s fiscal shock have in years to come? The short answer is: in further deterioration in America’s balance of international payments.

Of course, the US current account deficit pre-dates Mr Bush’s fiscal stimulus. Over the past decade, Americans’ personal saving has fallen more than government saving (or budget surpluses) has increased. The huge deficit in the current account, about 4.5 per cent of gross national product in 2000 and 2001, reflected this private saving gap. To support a normal level of private domestic investment - historically about 17 per cent of US GNP - America has had to draw heavily on the saving of the rest of the world.

But under further pressure from the Bush fiscal shock, the government’s surplus of 2 per cent or so of GNP from the 1990s is likely to be wiped out, or worse. US trade deficits will become even bigger in the future.

Given the country’s huge net debtor position of about $2,700bn in 2002, will even more sharply rising foreign indebtedness be a problem in the future? For the US, it will not be a problem in the usual sense - ie, when creditors suddenly demand their money back from an impecunious and overstretched debtor. Because the world is on a dollar standard - the dollar is the definitive currency in making inter- national payments and US debts to foreigners are all dollar-denominated - the US cannot literally go broke. As long as the dollar’s purchasing power over goods and services remains stable, the US economy collectively (though certainly not every household and company in it) can always find a way to roll over existing dollar claims held by foreigners.

By serendipity, America’s central position in the world’s monetary system gives the country a virtually unlimited international line of credit. Hence its ability to run trade deficits for the past 20 years without having to pay higher interest rates on that dollar-denominated debt as it was accumulated by foreign creditors.

Nevertheless, a big problem remains: an across-the-board decline in America’s international competitiveness into the new millennium.

As the real value of the dollar appreciates from the extraordinary capital inflow with continuing US trade deficits, aircraft exporters such as Boeing will become less and less competitive with Airbus of Europe, steel producers will continually claim unfair foreign dumping, movie moguls will shoot more films abroad, high-technology industries will outsource even more, and so on. US productivity growth could well diminish.

Already, American companies and unions are becoming even more protectionist - which puts the World Trade Organisation at risk in trying to preserve free multilateral trade.

Another consequence is that the world’s richest, most mature industrial economy is essentially draining the rest of the world of capital. This is particularly hard on emerging markets and other developing countries. Declining support for the US’s modest overseas development programmes for poor countries may be no bad thing but inadvertently grabbing the lion’s share of internationally available private financial capital certainly is.

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USA:s uppgång äntligen på väg
Johan Schück i DN 2002-01-26

I USA-ekonomin finns visserligen strukturella problem som inte är lösta. Tillväxten har delvis grundats på snabb produktivitetsökning, till föjd av stora investeringar och tekniska framsteg. Men hushållen har också bidragit genom att höja sin konsumtion, utöver vad de egentligen haft råd med.

Skuldsättningen gäller både hushållen, som saknar sparmarginaler, och USA-ekonomin i stort. Det långvariga amerikanska underskottet i bytesbalansen har visserligen kunnat täckas genom att omvärlden står till tjänst med kapital, som hittills finner bästa avkastning på den amerikanska marknaden. Men i båda fallen ger underskotten upphov till en instabilitet, som senare kan göra sig påmind.

Sådana bekymmer skjuts dock nu på framtiden. Världen har länge väntat på en amerikansk konjunkturuppgång.

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Interim Report: Notes on the U.S. Trade and Balance of Payments Deficits
Wynne Godley

The United States has a balance of payments deficit worth nearly 4 percent of GDP and negative net foreign assets (or foreign debt) worth nearly 20 percent of GDP. If U.S. growth is sustained in the medium term, it is quite likely that the balance of trade in goods and services will not improve. The United States is the only major country, or country "bloc," to have a substantial trade deficit and this is proving of great advantage to the rest of the world.

If the balance of trade does not improve, there is a danger that over a period of time the United States will find itself in a "debt trap," with an accelerating deterioration both in its net foreign asset position and in its overall current balance of payments (as net income paid abroad starts to explode). Such a trap would call imperatively for corrective action if it is not at some stage to unravel chaotically.

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An unsustainable black hole (The US current account deficit)
Martin Wolf, Financial Times, February 27 2002

Behind this worry is the view that three imbalances emerged in the course of the second half of the 1990s:

- excess corporate investment;

- insufficient household savings;

- and an unsustainable current account deficit.

Of these, only the first is disappearing.

The other two have not been corrected. On the contrary, the Federal Reserve's strategy and the hopes of the rest of the world for a US-led recovery depend on their not being corrected.

I have looked at household savings before ("When shoppers become savers", January 23). But will the current account deficit continue on its merry way? "Not for ever" is the answer.

At the end of 2000, the net international investment position of the US was minus $2,187bn, a little over a fifth of gross domestic product.

The current account deficit in the first three-quarters of 2001 was running at an annualised rate of $419bn. If one ignores changes in valuations, this means the net international position must have been roughly minus $2,600bn at the end of last year.

Thus, neither the current account deficit nor, inevitably, the stock of net liabilities to the rest of the world improved, even during a slowdown.

The US, it is hoped, is now on its way to a demand-led recovery. The current account deficit is therefore likely to widen further.

Goldman Sachs forecasts a rise in the US current account deficit from about $420bn last year (4.1 per cent of GDP) to $730bn (5.9 per cent of GDP) by 2006.

Five years from now the stock of net liabilities (if one ignores changes in valuations) would be $5,800bn. This would be 46 per cent of US GDP and about 15 per cent of the rest of the world's GDP (provided the dollar stays strong).

This trend cannot last. The difficulty is knowing when and how it will end.

But the longer the process continues, the more painful that ending is likely to be.

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Risking a hard landing
Martin Wolf , Financial Times, December 6, 2000

Nobody can have made much money out of betting against Alan Greenspan. But the US Federal Reserve’s redoubtable chairman is engaged in perhaps his trickiest task: slowing the US supertanker while avoiding the recessionary shoals. Most people confidently expect him to pull it off. Yet the likelihood of failure is considerable.

According to the latest Economic Outlook from the Organisation for Economic Co-operation and Development, real US domestic demand grew at an average annual rate of 5.3 per cent a year between 1997 and 2000. Over the same period, the growth of real gross domestic product averaged 4.6 per cent.
Since even this impressive expansion lagged behind demand, the result has been a sustained rise in the current account deficit, up from just 1.6 per cent of GDP in 1996 to a forecast of 4.3 per cent this year.

Even though the OECD has raised its view of the potential growth rate of the economy to 4 per cent a year, it estimates the current output gap - the deviation of actual GDP from potential GDP, as a percentage of the latter - at 2.5 per cent.

Thus excess demand has shown itself in both the current account deficit and unsustainable exploitation of domestic resources.

Against this background, the slowdown in the third quarter, with growth falling to an annualised rate of 2.4 per cent, is exactly what Mr Greenspan ordered. The big risk he runs is that the impact of this slowdown on confidence will trigger a rapid unwinding of today’s huge private sector financial deficit - or excess of investment over savings. This has happened to a number of other high-income economies over the past 20 years. The universal result has been recession.

I discussed this vulnerability in a recent article for Foreign Policy.
The Mother of all Meltdowns: what a Wall Street Crash will do to the world,
Foreign Policy, September/October 2000

Between 1992 and 2000, the US private sector moved from a financial surplus of 5 per cent of GDP, about 2 percentage points above its 1986-93 average of 2.7 per cent, to a historically unprecedented deficit of just over 5 per cent. This swing of 10 per cent of GDP in the US private sector financial balance has, in turn, been the principal engine of demand for the US economy and, to a significant extent, for the world.

Behind the swing in the US private sector’s financial balance have been both rises in the share of private investment and declines in the share of private savings in GDP. In 2000, private sector investment should reach 18.5 per cent of GDP, according to the International Monetary Fund, up 3.3 percentage points from its 1986-93 average. Meanwhile, private sector savings in 2000 should be about 13.4 per cent of GDP, well down from the 1986-93 average level of 17.9 per cent.

Why should US private investment have been so buoyant and private savings so weak? The answer is confidence, as shown in - and reinforced by - the soaring value of equities. Between August 1994 and August 2000, the real wealth (in 2000 prices) embodied in the stock market rose by $11,400bn - more than a year’s GDP.

The impact of this enormous increase in paper wealth on savings is difficult to determine. But it must have been substantial. Why should people bother to save as much as before when the stock market painlessly delivered, over a period of just six years, an increase in wealth greater than cumulative gross savings (never mind net savings) over such a period? But rising stock market valuations not only give a good reason to reduce savings. They have also stimulated investment.

The swing of the US private sector into financial deficit is a reflection of a virtuous circle: limited inflationary pressure; rising profitability and accelerating productivity growth; optimism among consumers and investors; soaring equity values; an improving fiscal position; powerful foreign demand for US assets; a strong dollar; and back again to limited inflationary pressure.

The question now is whether the recent collapse in the value of technology stocks, combined with slowing economic growth, could turn that virtuous circle into a vicious one.

In other high-income countries afflicted by significant declines in asset prices, swings in the net financial balances of the private sector have been as much as 10 per cent of GDP within a few years. That would bring US private sector financial balances back to where they were in 1992.

Such a reversal could follow a big collapse in confidence. That, in turn, would be reflected in - and multiplied by - a further big fall in equity prices. Since the market, excluding technology, media and telecommunications stocks, continues to trade at historically high price-earnings ratios - even though earnings are at cyclical peaks and the economy is slowing - the risks of this cannot be negligible.

Optimists insist that the tools of fiscal and monetary policy, combined with adjustment to the external balance, could offset the impact on economic growth of even drastic private-sector retrenchment. Formally, that is correct. But Japanese and British experience suggest that this can be difficult to achieve.

In the UK, for example, the general government’s financial balance collapsed from a surplus of just under 1 per cent of GDP in 1989 to a deficit of 8 per cent of GDP only four years later. According to the OECD, five percentage points of this deterioration reflected deliberately expansionary fiscal policy. Even so, the economy contracted sharply. Similarly, Japan’s general government financial balance moved from a surplus of just under 3 per cent of GDP in 1990 and 1991 to a deficit of 7 per cent last year. More than 8 percentage points of this deterioration reflected deliberate easing. Yet Japan has suffered a decade of stagnation.

It is implausible that US fiscal policy would, or could, be used with enough aggression to offset more than a modest swing in the private sector’s net financial balance, although a President George W. Bush might give it a good try. The so-called built-in fiscal stabilisers - the decline in tax revenues and increases in spending that automatically follow recessions - would merely cushion the impact, although at the price of a return to big fiscal deficits.

Monetary policy might be still more ineffective. In the context of a stock market collapse, the household sector would want to rebuild its wealth, not take on more debt. The corporate sector’s willingness to invest would be curtailed by declining equity valuations and slowing economic growth.

The immediate impact of an aggressive loosening of monetary policy would probably be on the exchange rate and the external account. Yet difficulties could then arise.

The Federal Reserve might be constrained by fear of a very weak dollar. In 1999, a current account deficit of $339bn was more than financed by $228bn in net foreign private sector purchases of US non-government securities and $130bn in net inflows of foreign direct investment.

If this inflow turned into an outflow, the US would have to finance both that outflow and the current account deficit. This could be done only with huge inflows of short-term speculative capital or purchases of dollars by foreign governments and central banks. Moreover, to the extent that the US is able to offset recession by improving its external balance, it will be exporting its problems to the rest of the world.

The US must now move smoothly to slower growth of demand and output without shaking underlying confidence. If this is to happen, the US private sector must remain both able and willing to run its unprecedented financial deficit. Possible? Yes. Certain? Hardly, is the only possible answer.

It’s not the end of the world
Martin Wolf, Financial Times, December 13 2000

Think the unthinkable. Suppose the US economy were to fall into recession. The probability is uncertain, but bigger than zero. Since it is good to be forearmed, let us examine what this might mean for the world.

Assume that the US private sector financial deficit, now at a record level of almost 6 per cent of gross domestic product, went into reverse, as the share of investment in GDP fell and the savings rate rose. Over the long term, the private sector financial balance has averaged not a deficit, but a surplus of between 2 per cent and 3 per cent of GDP. A return to the historic mean would entail a huge reduction in demand. An overshoot, quite normal during recessions, would generate a still bigger fall.

If the shift happened quickly, a recession would be inevitable. But it would be cushioned by a weaker fiscal position and an improvement in the current account. A conceivable outcome would be elimination of the current account deficit, along with a big budget deficit.

What might this scenario mean for the world? This was examined in my article, ”The mother of all meltdowns”, referred to in my column last week (FT, December 6) on the risks of a hard landing.* The means by which a US recession would be spread to the world are four: trade; capital flows and exchange rates; commodity prices; and contagion.

Start with trade. Suppose that a US recession reduced imports of goods and services by 20 per cent in real terms and raised exports 5 per cent, over just a few years. Such an adjustment would be the smallest needed to eliminate the current account deficit.

Direct demand for the rest of the world’s output would be reduced by about 1.3 per cent over the relevant adjustment period. The effect would be biggest on Canada, Malaysia, Mexico and Thailand, where the direct impact of the shift in trade balances on GDP would be between 3 per cent and 8 per cent of GDP.

Yet these are exceptional cases. The direct reduction in the GDPs of the western hemisphere and developing Asia would be about 2 per cent, although there would be a bigger effect on Hong Kong, South Korea, Singapore and Taiwan.

Central and eastern European countries in transition would not be too hard hit by the trade effect, since they do vastly more of their trade with the European Union: Poland exports as much to Denmark as it does to the US. The direct impact on the euro-zone, Japan and the UK would also be small - a little over minus 0.5 per cent of GDP. Only 2.3 per cent of the euro-zone’s GDP is exported to the US; for the UK, this ratio is 2.8 per cent; for Japan, it is 3.1 per cent.

Thus, provided the US trade adjustment occurred over a few years, most countries should easily avoid recessions caused directly by changes in trade balances.

The second channel would be a weak dollar. If inward capital flows were interrupted, as seems probable, the dollar could fall by a third, or even more, against the yen and the euro. Similar declines have occurred in the past. The fall would be accelerated by the inevitable reduction in short-term US interest rates. The currencies of most emerging market economies would presum-ably weaken with the dollar. Argentina would be ecstatic.

A serious weakening of the dollar would create a big challenge for Japan. The Bank of Japan might be forced to support open-ended exchange-rate intervention. The euro-zone would also be squeezed by a falling dollar. But it is in a far more comfortable position than Japan. Provided the European Central Bank cut interest rates promptly, it could shield the euro-zone and help stabilise the world economy.

The third channel would be commodity prices, particularly oil. A big US slowdown would have a powerful effect. The oil market, in particular, is finely balanced, with price-elasticities of demand very low in the short term. Oil prices could weaken quickly. This would reduce inflationary pressure, making it easier for the Federal Reserve and other central banks to respond. Lower oil prices would also directly benefit many emerging market economies but damage the prospects of oil-exporting countries.

The last and almost certainly most important channel would be financial. The biggest danger is contagion, particularly via stock markets. With the exception of the Japanese stock market, markets have long tended to take their cue from Wall Street. Canada and the UK would be particularly hard hit because of their close links to Wall Street. But in 1999 the ratio of stock market value to GDP in the euro-zone was half that of the US or the UK. Moreover, most of these holdings are corporate, not personal. Thus, even a steep decline in stock markets should have a much smaller impact on spending in the euro-zone than in the US.

The bottom line, then, is that a US hard landing would have a sizeable impact on the rest of the world economy, but would create benefits and opportunities along with the problems and challenges. Provided other countries responded in a sensible way, the world could adjust. Growth outside the US should remain positive, except perhaps in Canada, Mexico and several of the smaller export-dependent east Asian economies, particularly if the currencies of emerging market economies were to fall with the dollar and the ECB reacted positively. Japan could face a big crisis - but only because it is so fragile already.

This reasonably relaxed view assumes there are no wider political and policy repercussions. In the US, the disappointment might prove devastating, because unexpected: investors would be bitter; start-ups would stall; unemployment would soar; the reputation of Alan Greenspan, the Federal Reserve chairman, would be in tatters; the next president could be a one-term wonder; and protectionism would increase. At worst,the US might abandon its promulgation of an open, market-based world economy.

Similar doubts might emerge elsewhere. Since the slowdown would come so soon after the financial crises of 1995 and again of 1997 and 1998, governments in emerging-market economies would come under strong pressure to be more inward-looking. Led by France, the EU might promote the cause of a more dirigiste and egalitarian approach to the economy. The US model would lose some of its allure.

If the outcome were to include an ill-considered turning away from the world market by the globe’s weaker economies, it could be a tragedy. No less tragic would be a protectionist reaction in the US. But none of this has to happen. The world economy could cope with even a US recession. It is the job of policymakers to ensure that it does.

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Is Ballooning U.S. Trade Gap Taboo?
By Reginald Dale International Herald Tribune September 19, 2000

Except among economists, there seems to be a virtual taboo on discussing the biggest flaw in the otherwise brilliant picture etched by the U.S. economy in recent years - the huge and growing current-account deficit.

The deficit, largely fueled by record trade deficits, reached new heights in the second quarter of this year, exacerbating a major imbalance in the world economy, according to figures released last week.

And yet the deficit does not feature in any serious way on the agenda of the International Monetary Fund or of the Group of Seven leading industrial nations, the proper places for considering it.

Nor has the issue been raised by candidates in the current presidential and congressional elections, even though, if left untended, the deficit could ultimately lead to precipitous falls on Wall Street and in the value of the dollar.

The reason is simple: If candidates were to raise the issue, they would have to say how they planned to deal with it. But most of the possible solutions would be politically unpopular, and would mean an end to the consumer spending spree that has been a big feature of the Clinton boom.

The silence at international level is largely due to the fact that most of America's major trading partners are benefiting commercially from the U.S. deficit, and the strong dollar that goes with it, and would not necessarily like remedial action.

The counterparts of the U.S. deficit are huge surpluses in Japan and lesser ones in Europe as both areas work to regain economic strength by boosting their exports with the aid of weaker currencies.

American economists, however, are increasingly warning that a time will come - perhaps in a year or two - when other countries will no longer want to finance the deficit by lending vast sums that Americans have mainly blown on consumer spending.

The question is whether the inevitable turnaround in the deficit will come in a so-called hard landing, involving steep falls in share prices and the dollar, and major economic disruption, or a soft landing spread over several years with more modest, though still significant, declines on Wall Street and in the exchange rate.

In a paper presented to last month's annual symposium in Jackson Hole, Wyoming, sponsored by the Federal Reserve Bank of Kansas City, Maurice Obstfeld and Kenneth Rogoff said the dollar could plummet by 40 percent or more in a hard landing, in a similar fall to that of the mid-1980s.

In a soft landing, they said, a decline of perhaps 24 percent would be needed to rectify the trade deficit by making U.S. exports cheaper and imports more expensive. A turnaround could be triggered by a sudden slowing of U.S. growth, causing foreigners to reconsider investing in the United States, a stock market correction or a weakening dollar. Another oil shock, which some now predict, would create even greater uncertainty.

The answer, according to a study by Ernest Preeg, ''The Trade Deficit, the Dollar, and the U.S. National Interest,'' is to start working on a soft landing now and spread the pain over several years. Mr. Preeg says the next president should do four things: persuade Americans to save more through tax incentives and other measures; persuade Europe and Japan to stop relying so heavily on exports for economic growth; take steps to prevent countries like China and Japan from manipulating their exchange rates downward; and push for further trade liberalization to increase American exports.

Unfortunately, there are too many easy pretexts for postponing action. Even economists predicting a hard landing mostly agree that the deficit can still be easily financed for a while longer.

Other economists say there is nothing to worry about anyway, that the deficit is a sign of American strength not weakness.

That is the position of the Clinton administration, which contends that the deficit is the result of robust U.S. expansion while other countries have grown more slowly. The deficit and the strong dollar have certainly helped to keep U.S. interest rates and inflation down.

Even Mr. Obstfeld and Mr. Rogoff suggest that it might be easiest to continue living with the deficit and ''hope for the best.'' That is probably what will happen. But procrastination can only make an eventual crash landing more likely.

Opening Statement Of Representative James A. Leach
Chairman, Committee on Banking and Financial Services
Hearing on the Conduct of Monetary Policy, July 25, 2000

Turning to the state of the economy, it appears that the Federal Reserve is succeeding in moderating the rate of U.S. economic growth without precipitating a "hard landing," while providing a "soft cushion" for fiscal policymakers. Inflationary pressures remain relatively modest, due in part to Federal Reserve restraint, in part to the on-going improvements in productivity.

On the other hand, we are all aware that the U.S. continues to run a substantial current account deficit that must be financed from abroad. We look forward to any comments you might make on how long this situation can persist, its possible impact on the dollar, and what steps policymakers can take to bring national savings and investment into balance.

Testimony of Chairman Alan Greenspan
The Federal Reserve's report on monetary policy Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate July 20, 2000. Chairman Greenspan presented identical testimony before the Committee on Banking and Financial Services, U.S. House of Representatives, on July 25, 2000

Mr. Chairman and other members of the Committee, I appreciate this opportunity to present the Federal Reserve's report on monetary policy.

The Federal Reserve has been confronting a complex set of challenges in judging the stance of policy that will best contribute to sustaining the strong and long-running expansion of our economy.

The challenges will be no less in coming months as we judge whether ongoing adjustments in supply and demand will be sufficient to prevent distortions that would undermine the economy's extraordinary performance.

Monetary Policy Report forwarded to the Congress on July 20, 2000

Trade and the Current Account

The deficits in U.S. external balances have continued to get even larger this year. The current account deficit reached an annual rate of $409 billion in the first quarter of 2000, or 4-1/4 percent of GDP, compared with $372 billion and 4 percent in the second half of 1999.

Net payments of investment income were a bit less in the first quarter than in the second half of last year owing to a sizable increase in income receipts from direct investment abroad.

Most of the expansion in the current account deficit occurred in trade in goods and services. In the first quarter, the deficit in trade in goods and services widened to an annual rate of $345 billion, a considerable expansion from the deficit of $298 billion recorded in the second half of 1999. Trade data for April suggest that the deficit may have increased further in the second quarter. ...

Financial Account

Capital flows in the first quarter of 2000 continued to reflect the relatively strong performance of the U.S. economy and transactions associated with global corporate mergers. Foreign private purchases of U.S. securities remained brisk--well above the record pace set last year. In addition, the mix of

Despite a mixed performance of U.S. stock prices, foreign portfolio purchases of U.S. equities exceeded $60 billion in the first quarter, more than half of the record annual total set last year.

Capital inflows from foreign official sources in the first quarter of this year were sizable - $20 billion, compared with $43 billion for all of 1999. As was the case last year, the increase in foreign official reserves in the United States in the first quarter was concentrated in a relatively few countries.

April 12 (Bloomberg) -- The world economy will grow at a faster-than-expected 4.2 percent in 2000, fueled by the record U.S. expansion and increasing exports from developing countries to industrialized economies, the International Monetary Fund said.

Amid the prospects for faster growth came warnings from the IMF that U.S. economic strength may mask some of the biggest risks to the expansion of the world economy.

U.S. stock prices have risen in part based on ``unrealistic expectations of future earnings growth,'' the IMF said.

The fund's forecast also cautioned that the U.S. current account deficit - the broadest measure of trade - is too large and the country's savings rate too low, the IMF said. Those weaknesses could tip the U.S. into a ``mild'' recession if inflation picks up and investors lose confidence, according to the forecast.

"Continued strong growth in the United States in 2000 could lead to higher inflationary expectations and interest rates, lower earnings expectations and severe corrections in the stock market and exchange rate,'' the fund said.

The IMF projected a soft landing for the booming United States, forecasting growth of 3 percent next year after a strong 4.4 percent in 2000.

But an alternative — less likely — scenario assumed a pickup in global growth and inflation, followed by higher interest rates, a 25 percent correction in highly valued U.S. equity prices and a 20 percent slump in the dollar in response to a reversal of capital flows, the IMF said.

This would virtually bring U.S. growth to a halt and knock almost a full percentage point off next year’s world growth forecast. Japan would be especially vulnerable, the IMF added.

“We still believe that the baseline scenario is the most likely outcome, but there are risks,” Mussa said.

The IMF, noting that the dollar appeared overvalued against Europe’s single currency, the euro, also said it was worried about “significant misalignments” of several key currencies and about “very high stock market valuations.”

External imbalances around the world were also causes for concern, primarily the wide U.S. trade deficit and persistently large surpluses in Japan.

“It is becoming a matter of urgency to secure a smooth transition to a more sustainable pattern of global growth,” the IMF said. “The priorities in this regard are to contain excess demand pressures in the United States ... and to promote robust and durable economic expansions in Japan and Europe.”

The IMF added: “A more significant tightening of monetary conditions might well be needed.”

Unbalanced economy

From FT-leader, April 13, 2000

Predicting the end of the US economic expansion has not been a very profitable strategy over the past few years. But with new economy stocks waning, the International Monetary Fund's warnings about the vulnerability of the US economy are timely.

Since 1996, growth in demand in the US has exceeded growth in supply.

Instead of feeding through into inflation, this mismatch has led to a widening current account deficit, which reached 3.7 per cent of gross domestic product in 1999.

Despite this, insatiable demand for US assets has kept the dollar high.

The IMF stresses that huge increases in equity prices played a large part in fuelling the US expansion. High share ownership in the US means that there is a strong link between equity valuations and consumer spending. This contributed to the decline in the ratio of personal saving to disposable income, from more than 5 per cent in the mid-1990s to just 0.8 per cent now.

Meanwhile, rising equity prices lower the cost of capital, and raise investment. So private borrowing - the gap between private savings and investment - is at a postwar high.

History shows that such large imbalances are always corrected, one way or another. The IMF believes that further monetary tightening is needed in the US to engineer a soft landing. It warns that failing to address the problem could lead to a hard landing - with a recession in 2001.

Strong growth in other industrial economies will be vital in maintaining global momentum if the US starts to slow. Happily, the euro-zone is set for a period of strong growth. The Fund warns that the European Central Bank should not rush into further interest rate rises, as these could stifle the recovery.

The Federal Reserve Bank's strategy of giving the expansion plenty of breathing space has paid off so far. It will not necessarily continue to do so. The Fed should pay heed to the IMF's warnings at its next monetary policy meeting in May.

IMF, World Economic Outlook

Is the U.S. Trade Deficit Sustainable?
The global financial crisis of 1997-98 and the widening US trade deficit have precipitated fresh inquiry into a set of perennial questions about global integration and the US economy. How has global integration affected US producers and workers, and overall growth and inflation? Is a chronic and widening deficit sustainable, or will the dollar crash, perhaps taking the economy with it? If the problem was one of "twin deficits," as many thought, why has the trade deficit continued to grow even as the budget deficit narrowed to zero? If US companies are so competitive, why does the trade deficit persist? Is the trade deficit a result of protectionism abroad? Will it lead to protectionism at home? What role do international capital markets have?

Institue for International Economics book

Gunnar Örn: USA kraschlandar inom ett år
DI 1999-11-15

Varför ska världens rikaste land behöva låna pengar av omvärlden? För att hålla köptrycket uppe på New York-börsen?

Eller för att stötta dollarkursen? Även om det inte varit den ursprungliga avsikten har effekten blivit just den, och alla bävar för vad som ska hända när valutaströmmarna vänder.

USAs utlandsupplåning, alltså underskottet i den amerikanska bytesbalansen, är snart uppe i 4 procent av BNP. Så stort har det inte varit sedan 1987, strax före den beryktade börskraschen i oktober samma år.

Världens finansmarknader väntar nervöst. Om underskottet ska sluta växa måste USA antingen börja exportera mer eller importera mindre. Men det är svårt att se hur den omställningen ska ske utan att både börsen och dollarn rasar på kuppen.

Minskad importefterfrågan kräver att de amerikanska hushållen börjar öka sitt sparande och drar ned på sin konsumtion. Det skulle emellertid dämpa den ekonomiska tillväxten i USA.

Ökad export kräver att de amerikanska företagen blir mer konkurrenskraftiga. Om amerikanska produkter ska göras billigare i omvärlden - och utländska varor dyrare på den amerikanska hemmamarknaden - förutsätter det en svagare dollar än i dag.

Nu finns det en del experter som invänder att USAs underskott inte behöver vara något problem, så länge det lånade utländska kapitalet används till produktiva investeringar. Här har de en klar poäng. Det slitna uttrycket "leva över sina tillgångar" behöver inte vara tilllämpligt här.

Ekonomiprofessorn Gustav Cassel definierade det så här i början av seklet: "Ett land lever inte över sina tillgångar så länge underskottet i bytesbalansen är mindre än de samlade nettoinvesteringarna i landet."

Tesen upprepades i mitten av 1970-talet när Sverige åter fick stora underskott i bytesbalansen. Bland annat av SNS Konjunkturråd, som då bestod av Villy Bergström, Sven Grassman, Erik Lundberg och Göran Ohlin: "Så länge vi inte kommit i närheten av gränsen för vår kreditvärdighet ökar kapitalimporten våra möjligheter att sänka inflationstakten och öka den inhemska produktionen och sysselsättningen", hette det i 1977 års rapport.

Men allt beror på hur pengarna används. Sverige lyckades inte hoppa över 1970-talets kriser med hjälp av lånade pengar. Tvärtom, nyinvesteringarna krympte i takt med att bytesbalansunderskotten ökade. Utvecklingen tvingade fram två kraftiga devalveringar under 1981 och 1982.

Tio år senare rasade investeringarna så kraftigt att de inte ens räckte till att ersätta utslitet kapital, samtidigt som bytesbalansunderskottet rakade i höjden. Även detta tvingade fram en kraftig försvagning av den svenska kronan.

I slutändan beror allt på vilka investeringar som görs. Grovt uttryckt kan man säga att Sverige för 100 år sedan lånade till järnvägsbyggen och vattenkraft. 100 år senare gick pengarna till lyxsanering av betongförorter à la Brandbergen.

För att modifiera Cassels tes, kan man säga att ett land lever över sina tillgångar när det lånar till konsumtion eller improduktiva investeringar.

Dessutom, om alla länder finansierade sina nyinvesteringar med lån, skulle det till slut inte finnas några sparare kvar att låna av.

Under vissa omständigheter är det förmånligt för ett land att låna (importera kapital), ibland att spara (exportera kapital). Tumregeln är att mogna industriländer tjänar på att exportera kapital till snabbväxande "emerging markets", eller tillväxtmarknader.

Dagens amerikanska underskott är ungefär lika stort, mätt som andel av BNP, som det svenska var 1982 respektive 1992.

Skillnaden är att de amerikanska nyinvesteringarna är betydligt högre.

Men utvecklingen i USA de senaste åren påminner ändå en hel del om 1987: med krympande inhemskt sparande, stark dollar, växande underskott i utlandsaffärerna, stigande räntor men ändå rekordhöga P/e-tal på börsen.

Betyder det att historien måste upprepa sig? För att få svar på den frågan räcker det inte att bara titta på makrostatistik över nettoinvesteringar och valutaströmmar. Man måste gå på djupet och titta på hur investeringskapitalet används på mikronivå. Kan amerikanska bjässar som Intel, Microsoft och Cisco använda sina fordringsägares pengar mer effektivt år 2000 än de kunde 1987? Gör amerikanarna överlag intressantare och mer produktiva investeringar än européer och japaner? Har

USA, som världsledande nation inom IT och Internet, rentav blivit en "emerging market" som drar till sig investeringskapital från hela världen?

Om så är fallet kan amerikanerna fortsätta låna av omvärlden med gott samvete. Om inte, är den nuvarande utvecklingen helt ohållbar. Då har vi en kombinerad börskrasch och dollarkollaps att vänta inom en inte alltför avlägsen framtid.

IMF to urge raising US interest rates
FT, September 8 1999

The International Monetary Fund, in its forthcoming half-year report on the world economic outlook, will call for higher interest rates to slow down the US economy and avoid a hard landing. It will raise its forecast for growth in world economic output this year from 2.3 per cent to 2.8 per cent, including improved growth forecasts for all the Asian crisis countries.

According to the report, expansion of the US economy continues "almost without price or wage pressure". But the IMF sharply raised its forecast for US growth - to 3.7 per cent from 3 per cent in May - and warned that tighter monetary policy might be needed. "In order to limit the risks and to prevent overheating, timely increases in interest rates are probably needed and the sober budget policies of recent years must be maintained."

Yesterday, the IMF would not comment on the accuracy of the summary. "The IMF executive board discussed the world economic outlook last week. However, as is standard practice, final projections won't be ready until closer to the date of the scheduled publication [September 22] of the report."

The main risk the IMF sees is the continued imbalances in the current accounts of the US, Japan and Europe, and the methods by which these are being reduced. "The way this is done will determine how economic conditions continue," the summary said.

Dollar defies deficit - with a little help
BBC, August 17, 1999

The strength of the US dollar in the face of a growing trade deficit shows the global market knows when to pull together to ensure everyone gets what they want, says the BBC's Rodney Smith

There's lots of talk of the global marketplace, the global economy, global corporations; but it is instructive to stop and think just how much the nature of global commerce is changing the way policy makers make decisions.

The glowing example is the US economy, the Goldilocks Scenario, and the strong dollar. On its own, this has not been responsible for the phenomenal stability and steady growth in the US economy over this period. But it is connected.

Ian Harwood at Dresdner Kleinwort Benson points out in a recent DKB Global Economics Weekly that the strong dollar has been a remarkably sympathetic policy for all involved. If the US had not encouraged the yen and the mark to ease in the mid-1990s after the dollar fell to a post-war low, the world would almost certainly have flopped into deep recession followed by deflation. The strong dollar (thank Fed chairman Alan Greenspan too) gave the US firm monetary discipline when it was needed.

But there is a cost; the fast expanding trade deficit and the associated increase in international indebtedness. Sooner or later, says conventional thought, the deficit will knock the pins out from under the dollar.

That it has not done so yet, is probably testament to the huge pulling power of US assets, and in particular, high tech stocks, internationally. The US tech and internet sector still leads the world by miles.

Add to that the mysticism that surrounds the economic miracle of the Goldilocks Scenario, and it's no surprise that foreign investors think the US can do no wrong, big trade deficit or not.

However, as Ian Harwood shows us, this state of affairs is attractive so long as it is attractive; it's a good old fashioned economic conundrum. The key to avoiding problems is to keep the dollar strong, or at least allow only controlled weakness. Which is why the Japanese are so keen to stop the yen appreciating and why the Germans admit that a weak euro is good for their economy. No one wants to rock the boat.

But then, global policy makers have been learning that the interest of one is the interest of all. Let's see how long it can stay that way.

World's bankers warning on US economy
BBC, June 7, 1999

The world's central banks are worried about what would happen if the US economy goes into decline. The Bank for International Settlements (BIS), which groups together central bank officials from around the world, warns that a collapse of the US economic boom could bring economic turmoil to the rest of the world.

"One great danger to continued global expansion at present is that the US economy will overheat and that fears of subsequent recession will undermine stock markets, reduce wealth and cut spending," the BIS says in its annual report.

The BIS is worried because consumers and businesses in the United States are accumulating too much debt to finance the consumer boom, and because the US trade deficit is soaring. Too much debt "If investors became less willing to hold the rapidly expanding external debt of the United States, a falling dollar might increase nascent inflationary pressures in the United States, even triggering a hard landing," said BIS Chairman Urban Backstrom, head of the Swedish central bank.

His words echoed some of the fears of the US central bank, the Federal Reserve, which recently said it was considering raising interest rates to cool down the US economy. The BIS admitted that after a year of global financial turmoil, no one could predict whether stability had now returned to the world economy. "It would be highly imprudent simply to assume that all will be well," Mr Backstrom told his colleagues.

Testimony of Chairman Alan Greenspan U.S. Senate February 23, 1999

The new technologies and the optimism of consumers and investors are supporting asset prices and sustaining spending. But, after eight years of economic expansion, the economy appears stretched in a number of dimensions, implying considerable upside and downside risks to the economic outlook.

The robust increase of production has been using up our nation's spare labor resources, suggesting that recent strong growth in spending cannot continue without a pickup in inflation unless labor productivity growth increases significantly further.

Equity prices are high enough to raise questions about whether shares are overvalued.

The debt of the household and business sectors has mounted, as has the external debt of the country as a whole, reflecting the deepening current account deficit.

Business success in enhancing productivity and the expectation of still further, perhaps accelerated, advances buoyed public optimism about profit prospects, which contributed to another sizable boost in equity prices. Rising household wealth along with strong growth in real income, related to better pay, slower inflation, and expanding job opportunities, boosted consumption at the fastest clip in a decade and a half. The gains in income and wealth last year, along with a further decrease in mortgage rates, also prompted considerable activity in the housing sector.

The counterpart of our high and rising current account deficit has been ever-faster increases in the net indebtedness of U.S. residents to foreigners.

The rapid widening of the current account deficit has some disquieting aspects, especially when viewed in a longer-term context. Foreigners presumably will not want to raise indefinitely the share of their portfolios in claims on the United States.

Should the sustainability of the buildup of our foreign indebtedness come into question, the exchange value of the dollar may well decline, imparting pressures on prices in the United States.

In the recent economic environment, however, the widening of the trade and current account deficits had some beneficial aspects. It provided a safety valve for strong U.S. domestic demand, thereby helping to restrain pressures on U.S. resources. It also cushioned, to some extent, economic weakness in our trading partners.

Moreover, decreasing import prices, which partly came from the appreciation of the dollar through mid-summer, contributed to low overall U.S. inflation, as did ample manufacturing capacity in the United States and lower prices for oil and other commodities stemming from the weak activity abroad. The marked drop in energy prices significantly contributed to the subdued, less than 1 percent, increase in the price index for total personal consumption expenditures during 1998.

Full text

US: Trade deficit reaches record
Wall Street Journal 99-03-18

The US trade deficit reached a new record in January according to data released on Thursday.

Rising imports and falling exports pushed the trade deficit to $16.99bn in January, up from a gap of $14.06bn in December. It was the highest shortfall since records began in 1992.

The deficit suggests the US economy, which grew an estimated 5.6 per cent annualised in the fourth quarter of 1998, might not be on the verge of overheating as manufacturers and farmers struggle to sell to markets abroad.

But the continuing strength of imports reflected robust consumer demand in the US, one of the main driving forces behind the pace of economic expansion.

Exports fell from $79.55bn in January to $76.77bn, while imports rose from $89.57bn to $93.76bn, according to the commerce department.

While international weakness contributed to the record trade gap, it also helped to keep inflationary pressures at bay.

The trade figures showed that the $9.19 a barrel oil import price in January was the lowest in 25 years.

The contentious US trade gap with Japan dropped from $5.88bn to $4.66bn, the lowest in a year.

But the deficit with China jumped from $3.975bn to $4.877bn.


U.S. economist Fred Bergsten said he expected the dollar to fall sharply in 1999, with structural, systemic and cyclical considerations all pointing in that direction. In a paper to be presented at the World Economic Forum's annual meeting here on Friday 99-01-29, Bergsten said:

"One of the major global economic events of 1999 is likely to be a sharp decline in the exchange rate of the dollar."

US: Trade deficit at record high

The US trade deficit in goods and services soared to $15.5bn in November, as the global economic downturn continued to take its toll on the otherwise strong American economy.

Even with one month still to be counted for 1998, the deficit has already hit a record high of $153.9bn, edging out the old record of $153.4bn set in 1987.

US exports fell by 1.9 per cent in November, to $78.7bn, with sales of aircraft, computer equipment and farm products declining sharply.

Imports rose 0.4 per cent to an all-time high of $94.1bn, with the biggest increases seen in imports of vehicles, furniture and telecommunications equipment.

The US is facing record trade deficits for 1998 and 1999 because of the sharp fall in demand in Asia. "The basic dynamic behind this data remains the strength of our economy and the weakness of many of our trading partners," said a senior administration official.

Third-Quarter Trade Gap (Current Account/Bytesbalans) Sets Record

The boomerang theory, by Paul E. Erdman and Lex on Trade Deficit, Dec 8, 1998

Spend, spend, spend (highly recommended)

SvD ledarsida har sin egen förklaring

Trade and Current Accounts

Current account US and EU11 91-99
Current account balances
EU11 and US 1991-1999

U.S. Trade 1987 - 1998

Alan Greenspan 97-10-29

IMF US Trade deficit, October 1998

IMF om USA:s handelsunderskott


Arbetslösheten i Frankrike, USA och Tyskland 1992-1997

Professor Tim Congdon i Lombard Street Research Monthly Economic Review, July 1988

International financial commentators have become so obsessed with Japan’s various failures that a very serious macroeconomic disequilibrium now emerging in the USA has been almost unnoticed. A standard line has been “the American economy will slow down when the full effect of the Asian crisis comes through”. This is tantamount to saying that “the American economy will slow down because the balance of payments is moving heavily into the red”.

Indeed, the deficit on the current account of the USA’s balance of payments in 1998 will be the largest that the world has ever seen. Hardly any concern is being expressed by governments or in financial markets about the medium-term implications of this development.

The scale of the deficit would be remarkable even if the USA were a substantial lie creditor nation. But, in fact, foreign-owned assets in the USA exceeded the USA’s foreign assets by over $1,300b. at the end of last year.

The current arts account deficit in the first quarter (Q 1) was $47b. and will undoubtedly increase, perhaps towards $60b., in Q2.

The current account deficit may be $230b. - $250b. in 1998 and a rather higher figure of, say, $300b. in 1999 and 2000.

The USA’s negative position on its international investments (“its net debt”) may by the end of 2000 be almost $2,OOOb., which would be more than twice the value of its exports.

There is little question that the USA will also have a large and widening deficit on investment income. (See pp. 8 - 9 of this Review.) To prevent the external debt running out of control, exports will need to grow faster than imports for an extended period. But this will require a drastic wrench to the growth pattern enjoyed over the last six years. Net exports were a negative influence on GDP in 20 of the 24 quarters to Q1 1998.

What form will this wrench take? Plainly, the growth of domestic demand will have to run at a beneath-trend rate also for an extended period.

But how likely is that in late 1998 and early 1999 after three years of high money supply growth, vast capital gains from the asset price bubble and an extremely buoyant housing market? (Seep. 5, p. 7 and p. 12.) Also helpful would be a lower dollar.

Sooner or later a fall in the dollar is inevitable, but it probably will not happen in late 1998.

The favourable interest rate differential compared with other leading currencies (apart from sterling) protects the dollar and will widen further when the Federal Reserve tightens.

The resolution of the USA’s external disequilibria will begin to become part of policy-makers’ agenda only next year and thereafter.

But the longer the deficit persists, the greater will be foreigners’ accumulation of claims on the USA and the worse the eventual problem of adjustment.

8th July, 1998

More of Tim Congdon

The US trade deficit soared by 10% to a record $15.75bn in May, the highest since the current monthly series began in 1992. The trade gap is running at a record annual rate of $150bn, up almost 50% on last year's figure, based on the first five months of the year.

The figures came as a surprise to analysts, who were expecting an improvement in the trade deficit after April's record gap of $14.5bn.

Kommentar RE: Läsarna av Net Bulletin lär väl dock ingalunda ha blivit förvånade. Det stora underskottet visar, menar jag, att USA inte alls är inne i någon s k ny era - Clintoneran? - utan har en vanlig överhettning, som Sverige hade i slutet av 1980-talet, med full sysselsättning, goda statsfinanser, låg arbetslöshet och stigande villapriser och aktiekurser.

När den amerikanska bubblan spricker, kommer den att spricka med besked. Dollarn kommer att falla, som en växelkurs bör göra i ett land med stort handelsunderskott, och alla direktörer i Västeuropa som tror att dom är duktiga för att deras företag går med vinst när dollarn står i åtta kronor kommer att se lika förvånade som löjliga ut. Liksom deras eftersägare.

Slutsats: Du som inte vill framstå som en löjlig eftersägare bör således redan nu distansera Dig från den fåniga uppfattningen om nya eror. Att byta fot är väl inte så svårt för Dig? Sväng kappan och fortsätt vara framgångsrik! (Ursäkta sarkasmen - Den som inte känner sig träffad är heller inte träffad - och tvärtom.)

Exports plunged 1.3% to $76.23 billion, their lowest level in 15 months. Imports, meanwhile, increased 0.5% to $91.98 billion, the second-highest level on record.

For the first five months the year the trade deficit totaled $64.88 billion, compared with $46.49 billion in the same period last year and on pace to easily surpass 1997's $153.31 billion shortfall, a 10-year high.

June 11, 1998, TREASURY SECRETARY ROBERT E. RUBIN, SENATE FINANCE COMMITTEE, I think that your hearing today on the trade deficit provides all of us a most useful opportunity to discuss many issues of great public importance.

BIS-Bankens i Basel VD Juni 1988

However, the year has contained darker elements as well. The Japanese economy has thus far failed to respond to repeated policy initiatives, and the crisis among trading partners elsewhere in Asia raises the possibility of mutually reinforcing weakness in the region as a whole.

The sharp decline in commodity and oil prices will place a heavy burden of adjustment on a number of already fragile economies.

The buoyancy of stock markets and bond markets in industrial countries, and the strength of capital inflows into non-Asian emerging markets, could in themselves be described as good news. Yet the enthusiasm of financial markets also raises another spectre: that it may not last, and that the economic effects of such a change in sentiment might be difficult both to predict and to manage.

The economic expansion in the industrial world is still being led by the United States, where the economy has continued to grow rapidly under the influence of strong domestic demand and healthy productivity gains. Developments in the United Kingdom have mirrored the US experience in some respects.

The economic and financial drama unfolding in Asia over the last year or so has understandably puzzled and preoccupied both policy-makers and market participants. The deterioration in the economic fortunes of many of the affected economies has been extraordinary, particularly given the widespread belief that their earlier successes were based on sound fundamentals. Unfortunately, these earlier successes seem to have contributed as well to a climate of excessive optimism among both borrowers and lenders. As a result, inadequate attention was paid to the rapid build-up of domestic and foreign debt by domestic corporations.

Also ignored was the significant threat this would pose to the stability of local banking systems should heavily managed exchange rate regimes come under pressure. Once difficulties emerged, a sharp and simultaneous reassessment of exposures to liquidity risk, market risk and credit risk then turned what might otherwise have been an orderly adjustment into a prolonged crisis.

We should not forget that a counterpart to strong growth with low inflation in both the United States and the United Kingdom has been a firming of the exchange rate and a widening of the trade deficits.

So far such deficits have been easily financed. However, a greater degree of hesitancy on the part of foreign investors could alter this situation and, in turn, the role played by the exchange rate in keeping domestic inflation subdued. Monetary policy might then need to take more of a leading role in maintaining price stability, and this would be all the more likely were the recent downward trend in commodity prices to reverse.

A closely related issue is the current buoyancy of financial asset prices in many industrial countries, amid associated concerns that investors everywhere may be underestimating the riskiness of certain kinds of financial investment.

In setting monetary policy, the implications of rising asset prices for spending and inflation must obviously be taken into account.

The experience of Japan, the Nordic countries and the United States in the early 1990s, and other parts of Asia more recently, indicates that asset price bubbles fuelled by bank credit can cause lasting damage to the banking system and to the broader economy.

While property prices figured prominently in earlier crises, and such prices have only just begun to turn up in many industrial countries, the current rapid expansion of monetary aggregates in a number of countries needs to be closely monitored.

More on

BIS (Bank of International Settlements centralbankernas internationella samarbetsorgan) skrev samtidigt i sin årsrapport på måndagen att dollarn blivit "påtagligt övervärderad" gentemot övriga valutor, 21 procent övervärderad mot D-marken och hela 33 procent mot yenen. BIS menar att det borde gå 95 yen per dollar. BIS tror också att USA bytesbalansunderskott därför kommer öka ytterligare från fjolårets underskott på 166 miljarder dollar. enligt Finanstidningen 98-06-09

Even if the output effects /of the Asian crisis/ are limited, though, the impact on trade balances will be large - and damaging trade frictions could easily result. This is particularly true for the US, which is absorbing much of the trade adjustment. The OECD expects the US trade deficit to grow to $226bn (2.5 per cent of GDP) this year, and $260bn next year.

US Trade deficit hits record high in March 1998

The U.S. trade deficit soared to a record $13 billion in March with imports of autos, consumer goods and foreign food all climbing to the highest levels in history.

America's trade gaps with Japan, China and other Asian countries widened dramatically as the Asian crisis crashed onto America's shores, underscoring the political problem facing the Clinton administration.

The Commerce Department report Wednesday showed that the March deficit in goods and services was up 7% from a $12.2 billion imbalance in February, marking the fourth straight monthly increase.

So far this year, the deficit is running at an annual rate of $147 billion, far ahead of last year's $113 billion trade gap. The soaring deficit is expected to represent the chief impact on the U.S. economy from the financial meltdown of several Asian economies last year.

For March, America's deficit with Japan jumped 8.8% to $5.8 billion, the worst showing in five months as imports of machinery and telecommunications products jumped. Last Friday, Clinton praised Japanese Prime Minister Ryutaro Hashimoto for putting forward a credible $125 billion package of tax cuts and increased government spending to boost the moribund Japanese economy.

But U.S. officials continue to stress that Japan must move on the package quickly as well as deal with its shaky banking system in order to serve as an ''engine of growth'' for smaller troubled Asian nations.

The deficit with China jumped 7.8% to $3.8 billion as U.S. exports fell.

America's trade woes were widespread in March with the deficit with European countries rising sharply as well. The deficit with German hit an all-time high of $2.3 billion as imports of German automobiles surged.

Economists note that the trade deficit in large part reflects the fact that the United States for some time has been growing much faster than other countries with soaring consumer demand being satisfied in large part by production from overseas.

But the widening trade gap has been a political headache for the administration, with critics charging that Clinton's strategy of pushing to lower trade barriers has cost millions of American jobs lost to low-wage Asian nations.

The $13 billion March deficit was the largest imbalance since the government starting keeping track of merchandise and services trade on a monthly basis in 1992.

The deficit in just merchandise of $20.2 billion was an all-time high.

This was offset somewhat by a $7.2 billion surplus in services, reflecting such things as airline fares and royalty payments.

Imports soared 3.8% to $92.4 billion as imports of $23.1 billion in capital goods, $13.1 billion in autos and parts, $17.9 billion in consumer goods and $3.6 billion in food all set records.

U.S. exports, which had fallen for two straight months, rose 3.3% to $79.4 billion with the advance led by a $1 billion rise in exports of civilian aircraft.

The overall deficit would have been worse except for the fact that oil prices have been falling sharply. The average price for a barrel of foreign crude oil dipped to $11.95 in March, the lowest level since March 1994.

Kommentar RE

USA Today 98-04-30:
Indeed, exports fell at a 3.4% rate, the sharpest drop in 4 1/2 years. At the same time, imports shot up at an 11.6% pace. The combination produced the worst deterioration in the U.S. trade deficit on record for the past half century.

04/17/98 Trade deficit hits all-time high of $12.1B

America's trade deficit climbed to an all-time high of $12.1 billion in February as the imbalance with Japan surged by 21% and U.S. merchandise exports fell to their lowest level in a year. The new report Friday dramatically underscored the biggest problem facing an otherwise stellar U.S. economy, a widening trade deficit that is likely to grow much worse as the year progresses, given the economic problems in many Asian countries.

Rolf Englund: Mats Svegfors har i sin betraktelse (98-03-14) i SvD förundrats över att det är så gott om jobb i USA och så ont om jobb i Sverige. Svegfors äldsta dotter har nämligen haft en utbytesstudent från USA hos sig. Den unga damen har förundrats över att det är så ont om jobb i Sverige, medan det är så gott om jobb i USA. Svegfors delar denna förundran.

Att den unga personen från USA inte har så långt eller djupt perspektiv är inte så mycket att säga om - det hör till åldern. Men nog hade det varit på sin plats om SvD:s chefredaktör hade erinrat sig att det här med sysselsättningen har skiftat över tiden, både i USA och i Sverige.

Det är ett sedan länge känt faktum att sysselsättningen svänger med konjunkturen. Hög efterfrågan, från in- och utland, gör att sysselsättningen stiger. Låg efterfrågan, från in- och utland, gör att sysselsättningen sjunker.

Den närmast till hands liggande förklaringen är således att se efter hur det är med efterfrågan, från in- och utland, i Sverige och i USA, nu och i gången tid. Som alla vet är det inte bara att öka efterfrågan, från in- och utland, för att få ökad tillväxt och stigande sysselsättning. Då hotar nämligen handelsbalansen att försämras, när importen stiger. När handelsbalansen försämras blir det antingen (vid fast växelkurs) valutakris följt av förlorade år, eller (vid rörlig växelkurs) fallande växelkurs och ökande inflationstryck.

I dag har Sverige ett större handelsbalansöverskott än Japan i förhållande till BNP. USA har nu ett rekordstort handelsunderskott. Huvudspåret är således att den låga sysselsättningen i Sverige beror på för låg efterfrågan, och att den höga sysselsättningen i USA beror på för hög efterfrågan. Detta är huvudspåret.

Om man vill förklara världen med hjälp av nya eror (USA) eller strukturproblem av gammalt datum (Sverige) har man bevisbördan.

Se även: Mats Svegfors och den svenska skuldkrisen, Rolf Englund 2001-02-01

U.S. Trade Deficit Expands As Imports From Asia Rise

America's foreign-trade deficit widened to $166.4 billion 1997, the second-worst showing on record, as the shortfall for the final three months of the year deepened to the highest level in history.

The Commerce Department said the 1997 deficit in the current account, which covers trade in merchandise, services and investments, widened 12.3 percent from a 1996 deficit of $148.2 billion Economists expect the deficit to widen further this year as the Asian financial crisis cuts into American exports to the region and increases sales of Asian products in the United States.

The administration says U.S. exports have risen to record levels and the huge deficits simply reflect the fact that the American economy is growing at a much faster rate than the economies of many of its major trading partners.

The 1997 deficit has been surpassed only once, by a $168.1 billion all-time high set in 1987. Economists expect the troubles in Asia will mean a new record deficit this year.

Signs of the worsening trend were evident in the final three months of the year when the deficit jumped to $45.6 billion, a record, up 5.8 percent from the third-quarter deficit of $43.1 billion.

For 1997, the investment category of the current account registered a deficit for the first time in the postwar era. The deficit of $14.3 billion in 1997 followed a surplus of $2.8 billion in 1996.

International Herald Tribune, Friday, March 13, 1998

US deficit: Trade tremors
FT Lex FEBRUARY 20 1998

It is a scary thought that the US trade deficit is at its highest level in nine years, even though the full impact of Asia's crisis has yet to be felt. Take Japan, which has just recorded its first deficit with the rest of Asia for eight years. Given the US economy's momentum it is not difficult to guess where hard-pressed Japanese exporters will be directing their attention. And that goes doubly for their more desperate regional neighbours.

The rise in imports in yesterday's US December trade figures is only a hint of what is likely to happen once Asian manufacturers have sorted out the credit problems that are restricting their production. Meanwhile, US exports are being hit by dollar strength and slower growth abroad. Under these circumstances it is hard not to see the US trade deficit ballooning out of sight this year. In turn, this is likely to lead to a revival in trade tensions, particularly given Japan's apparent unwillingness to cut taxes to stimulate domestic demand.

Investors have been remarkably willing to ignore Asia now the immediate financial crises have abated, pushing the market to new highs. These trade figures suggest, however, the full economic impact may be later but also greater than expected - the Federal Reserve is quietly notching up its assessment of the slowdown in US economic growth from 0.5 to 1 percentage point.

The notion that the Asian crisis is over looks too sanguine.

USA:s handelsunderskott 114 miljarder dollar (912 mrd kr) under 1997
The U.S trade deficit last year hit its highest level in nine years after posting an unexpectedly large increase in December.The December trade deficit jumped 24.3 percent to $10.79 billion from $8.68 billion in November. That brought the total shortfall in goods and services trade to $113.75 billion, the highest deficit since a $115.9 billion gap in 1988 when Ronald Reagan was president

USAs handelsunderskott 1996 det största på 8 år

En stigande import anges som orsaken. Underskottet för 1996 blev 114 miljarder dollar (843 mrd kr), upp från 105 miljarder dollar år 1995. Exporten blev 836 miljarder dollar, medan importen blev 950 miljarder dollar.

(Wall Street Journal 1997-02-20)

Enligt USA är det Japans problem dess eget fel. Om de bara avreglerade sina marknader och ökade den inhemska efterfrågan (RE: förlegad keynesianism?) skulle stagnationen upphöra och överskotten i utrikeshandeln smälta bort. Under hela 1980-talet och början på 90-talet klagade Japan och Tyskland på att underskottet i den amerikanska bytesbalansen berodde på för stora offentliga utgifter i USA. Men det är inte längre så. Det strukturella (justerat för konjunkturläget) budgetunderskottet i USA sjönk, enligt den senaste World Economic Outlook från IMF, från 4.1 procent av BNP år 1992 till mindre än en procent i år. Högkonjunkturen just nu gör att det faktiska budgetunderskottet är ändå lägre.

USA:s bytesbalansunderskott (handelsunderskott + räntor mm) beräknas enligt IMF stiga från sex miljarder dollar år 1991 till 205 miljarder dollar (runt 1 550 miljarder kronor) 1998. Det året väntas Japan få ett överskott på 98 miljarder dollar. EU-länderna beräknas gå från ett under-(repeat: under-) skott på 82 miljarder dollar till ett över-(repeat: över-)skott på 99 miljarder dollar år 1998.

Kommentar RE: Det kan förklaras antingen av det utmärkta europeiska företagsklimatet, eller, väl mer sannolikt, den låga inhemska efterfrågan inom EU-länderna som håller arbetslösheten uppe och importen nere.

Martin Wolf i Financial Times 97-09-23

Diagram ur The Economist 97-09-21 from IMF

Kommentar RE

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