Wednesday, February 11, 2009
Trade deficit falls to six-year low
Be careful what you wish for!
As I have been saying all along, rich countries tend to run trade deficits and capital account surpluses. This is exactly what the U.S. had for many years and it grew not because of our profligacy, but because it was the desire of foreign nations to "net save" in U.S. dollars and achieve full output and employment by selling products to the U.S. even at the expense of the living standards of their own citizens.
The fact that the U.S. trade deficit is shrinking rapidly is not something to cheer, but a reflection of the fact that our policies are making us poorer and by corollary, making the rest of the world poorer as well.
Blame this on fiscal conservatives and policy that is driven by a gold standard mentaility. The idea that we can only prosper if others lose. It's terribly destructive and an idea the world basically got away from 200 years ago.
Read full article here.