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Politics : Politics for Pros- moderated

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To: LindyBill who wrote (378039)	8/13/2010 10:45:11 AM
From: rich evans	of 793887

National Investment equals private investment - trade deficit. The trade deficit or current account deficit must equal the capital/financial surplus according to Bernankes textbook on page 179 and other FED speeches. So the larger the trade deficit, the more investment and finance comes into the US from Foreigners who have our money. This makes up for the budget deficit problem. National Savings = private savings - the budget deficit and National Savings = National Investment. We have had 5% budget deficits in the past which were balanced out by the 5% trade deficit which meant foreigners were putting money into the country. Unflortunately, we now have 10% budget deficits and only 5% trade deficits so we are not going to get the same offset. But private savings has increased from about 1% to 6 % to make up the difference but that is not expansiony or create much growth so far as it is all deleverging. ( Witness Japan). So I agree that trade deficits are not bad but signify growth as long as the trade is in dollars which come back here as investment. Rich

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