Well, I took some time to study the data at the links you provided. Thanks. More on what I found in a subsequent post.
Regarding the trade deficit, a bugaboo with many bears. It does appear that it may have increased as a percentage of GDP, but it's difficult to assert for sure due to the caveat of chained dollars.
Falling exports and rising imports adjust the trade balance until it matches the net inflow of capital. In effect, foreign investors will outbid foreign consumers for limited U.S. dollars until the investors satisfy their demand for U.S. assets. Of course, most day-to-day currency transactions are not directly related to trade, but demand for U.S. goods, services, and assets affects demand for the dollars needed to buy them, thus influencing the value of the dollar in global currency markets.
freetrade.org
You might say, in light of the dollar strength despite the trade deficit and recent share market performance, that we developed an alternative to gold that is much more easily created.
Someone pointed out to me on this thread that gold provided a service (economic value), in that it formed the basis for a stable currency, thus decreasing friction, increasing trade and growth. It would appear the dollar has also performed this service of late, though it's manufacture doesn't require the large scale leach mining of it's distant cousin and predecessor. |
