4/13/2005

U.S. Trade Deficit Exploding

The U.S. trade deficit hit a record monthly high of $61.04 billion in February. Imports of oil and textiles surged but exports didn't do much of anything. The February deficit is up 4.3 percent from the January figure of $58.5 billion. Wall Street's investors worry that the huge amount of foreigner's money America needs to fight the deficit could at some point trigger a freefall in the dollar and make the nation's inflation problems tougher to deal with. As for Democratic critics, they viewed it as further evidence that President Bush's free trade policies aren't working. But the Bush administration says the deficit primarily shows the fact that the U.S. economy has been growing at a much faster pace than the countries' economies with which the U.S. has been trading. This, they say, pushes up imports while dampening demand for U.S. exports. Whatever it may be, there is a lot of stir going on with what is happening. It's not just investors who worry, it's the congress and even economists.

2 comments:

Dr. Tufte said...

-1 on Fred's post for capitalization errors.

What does this have to do with ManEc?

This article is fairly well flawed. For example, why should we pay any attention to trade deficit numbers that are not corrected for inflation?

The Bush position is essentially correct for this month and other recent periods.

However, it offers no theory for why the U.S. has had persistent trade deficits for 30 years.

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