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U.S. Trade Deficit Hits All-Time High

Discussion in 'BBS Hangout: Debate & Discussion' started by wizkid83, Feb 10, 2006.

  1. wizkid83

    wizkid83 Contributing Member

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    http://news.yahoo.com/s/ap/20060210...vqyBhIF;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA--


    By MARTIN CRUTSINGER, AP Economics Writer1 hour, 44 minutes ago

    American appetites for all things foreign, from oil to cars to clothing, pushed the trade deficit to yet another record in 2005.

    And the year's $201.6 billion deficit with China, the largest ever recorded with a single country, brought demands for a crackdown on what the U.S. sees as unfair trade practices.

    The Commerce Department reported Friday that the overall trade gap climbed to an all-time high of $725.8 billion last year. The deficit was up 17.5 percent from 2004, marking the fourth straight record.

    On Wall Street, the Dow Jones industrial average rose 35.70 points to close at 10,919.05 Friday after being down as much as 63 points earlier in the session.

    The chief culprit in pushing the deficit up last year was record global oil prices and increased U.S. demand because of a loss of Gulf Coast production following Hurricane Katrina. The U.S. foreign oil bill soared to a record $251.6 billion, up 39.4 percent from 2004.

    Imports of other consumer goods including foreign autos hit record levels as well, a development that is causing major woes for U.S. automakers.

    Analysts predicted that the 2006 trade gap will be even worse, with Global Insight forecasting it could hit $810 billion, reflecting lagging economic growth overseas that could hold back U.S. exports.

    "Trade is far and away the largest weight on the U.S. economy at present," said Mark Zandi, chief economist at Moody's Economy.com. "This is a risky time."

    The record amounts of dollars that are flowing into foreign hands to pay for imports are being invested in U.S. stocks, bonds and other investments. Economists worry that if foreigners suddenly decide they want to hold fewer U.S. assets, they could send the value of the dollar, stocks and bonds all plunging.

    The record flow of foreign goods into this country has given consumers a wide array of choices at low prices, helping to keep a lid on inflation. But critics contend the trade deficits have contributed to the loss of nearly 3 million manufacturing jobs since mid-2000 as U.S. companies moved production overseas to lower-waged nations. Many economists believe those manufacturing jobs will never come back.

    "America's gargantuan trade deficit is a weight around American workers' necks that is pulling them into a cycle of debt, bankruptcy and low-wage service jobs," said Richard Trumka, secretary-treasurer of the AFL-CIO.

    In an effort to counter economic anxiety, Bush included in his new budget an American Competitiveness Initiative to double government spending on basic research, extend tax breaks for company spending on research and hire thousands of new math and science teachers for the nation's high schools.

    Many in Congress want a tougher approach. Legislation with broad support in the House and Senate would impose across-the-board tariffs of 27.5 percent on Chinese imports unless China stops what critics charge is a blatant manipulation of its currency to gain trade advantages.

    Other legislation introduced on Thursday by Sens. Byron Dorgan, D-N.D., and Lindsey Graham, R-S.C., would make China's current low tariffs subject to annual review by Congress to make sure the country is following global trade rules.

    Dorgan said the new deficit figures showed that U.S. "trade policy is an unbelievable failure that is selling out American jobs and weakening our economy."

    Sen. Charles Schumer (news, bio, voting record), D-N.Y., who is pushing the currency legislation, said the rising deficit amounted to a "a slow bleeding at the wrists economically for the United States."

    Commerce Secretary Carlos Gutierrez, touring an IBM facility in North Carolina, said Friday that the administration's approach of emphasizing such things as expanded access for U.S. exports in countries such as China was the better approach.

    "We can't overreact and make tactical choices that will hurt our economy," Gutierrez said.

    Last year, imports rose by 12.9 percent to an all-time high of $2 trillion, swamping a 10.4 percent increase in exports, which reached 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 $201.6 billion U.S. trade deficit with China was the highest ever recorded with any country. It was up 24.5 percent above the previous record deficit of $161.9 billion with China set in 2004.

    The United States ran up record deficits with much of the rest of the world including Japan, the European Union, OPEC nations, Canada, Mexico and Central and South America.

    ___

    This makes me mad, we are financing the deficit right now because the other country are happy buying American stocks and money bonds. But if some one decides to rapidly stop, it would mean inflation like mad and anything I save up being basically worthless. **** needs to turn around and we need to stop with this stupid consumption and exportation of U.S. jobs.
     
  2. user

    user Member

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    Don't be mad. When foreigners stop buying American bonds, the US Dollar will devalue. Then there will be more export products instead of jobs with a lowered dollar value. It's all about economics.

    Big spending just means that you are richer than the rest of the world. When you are relatively poor or not that rich, you will produce. It's good to be rich.
     
  3. snowmt01

    snowmt01 Contributing Member

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    How many imports were made by US company overseas?
     
  4. wizkid83

    wizkid83 Contributing Member

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    Too many, especially the ones in Mexico with NAFTA basically moving the auto industry south and China with the cheap labor. So it's still Americans getting paid, just that it's the fat cats on the top.
     
  5. jo mama

    jo mama Contributing Member

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    the death of the middle class, as lou dobbs says.

    bush has spent more than all previous presidents combined. he is the biggest fiscal liberal this country has ever had. how can any real conservative support this joker?
     
  6. bigtexxx

    bigtexxx Contributing Member

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    Japan, who is by far the largest buyer of US bonds, cannot afford to stop buying US treasuries because it keeps their exports cheap here. Same story on a smaller scale for China.

    There are investments that you can put your money in that do well in inflationary environments. Inflation is quite tame right now, however, and is not a concern.
     
  7. wizkid83

    wizkid83 Contributing Member

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    Crazy thing is, I think it's that catch 22 in the business world that's gonna keep this thing going for quite a while longer. We in the U.S. can't stop consuming, other country are making a lot off of that, in turn they use the profits to buy bonds in the U.S. that helps keep us going. Now the question is if they stop buying, then U.S. becomes poorer, unable to consume as much, and then their economies tank.

    This sounds messed up enough to be the logic Enron used to show profit for their annual reports.
     
  8. Invisible Fan

    Invisible Fan Contributing Member

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    I've posted news about this in the past. It seems the other parts of the world has no choice but to stay the course because their own domestic markets can't sustain consumer spending needed to overtake the dollar.

    Almost all economists agree that this can't last forever, though none have a clue what will happen. Whether these economists are religious or not, all are privately praying for a soft landing....
     
  9. Deckard

    Deckard Blade Runner
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    They are praying that America doesn't become another Argentina.



    Keep D&D Civil.
     
  10. Invisible Fan

    Invisible Fan Contributing Member

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    Argentina's GDP is smaller than Walmart's or Exxon-Mobil's net worth...

    That 45 trillion deficit in 34 years thread is still relevant and if this BS continues there'll probably be a world war over resources that'll wipe out all paper debt.
     
  11. Deckard

    Deckard Blade Runner
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    Argentina was once the wealthiest country in Latin America. It was compared, at the time, to European countries, and had a high standard of living, especially for the region. Americans seem to think that what happened to them can't happen to us. I hope it doesn't.



    Keep D&D Civil.
     
  12. TMac640

    TMac640 Contributing Member

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    if any country calls for their debt, bomb them.

    -God.
     
  13. glynch

    glynch Contributing Member

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    At least we are still the best at that.

    The Argentina example is scary. Also the British Empire, which was in sad decline till the North Shroe Oil Field, which they have pretty much gone through, is probably more analogous. As we see in Latin America the colonies are resisiting.
     
  14. zksb09

    zksb09 Member

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    There's an interesting discussion by some famous economists in a forum at the Financial Times:
    http://www.ftblogs.typepad.com/martin_wolf/
    One point of view is that the imbalance will be resolved through differential inflation over time (where internal inflation effectively causes a value change in currency, even though the nominal exchange rate with other countries might remain the same). The other point of view is that for several reasons, including the Fed's monetary policy on containing inflation, the adjustment will happen through an adjustment of nominal rates.
     
  15. tinman

    tinman Contributing Member
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    well, people aren't buying american cars because they keep blowing up.
    http://www.cnn.com/2005/US/06/16/ford.vehicles/index.html
    Ford document: Millions of vehicles have fire risk part
    [​IMG]
    haven't they learned from BMW or Toyota?
    people don't like the cheap tupperware plastic Pontiac interiors.

    we're americans we keep other countries in business. that's our job.
     

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