on meaningfulness of trade deficit
of course, over time, QCOM will kick ass, take names, leave a trail of broken bodies and broken companies
Voltaire, it leads to a serious situation over time... some foreign economies depend heavily on USdollar trade imbalance in their favor... see China and a host of South American countries... the result is placing an increasing proportion of USdollars in foreign hands out of domestic control
sure, it leads to a greater extent the usage of the US$ as a "store of value"... some foreigners love to hold them since their savings dont erode... Argentina is now linked to the US$... talk now of the new Euro currency being linked formally to the US$
but downside, it leads to greater volatility in the currency markets... past trade deficits (like past 4 years) has put mucho bucks in foreign hands, foreign accounts, foreign central banks... they sometimes become momentum players as a trend changes
LIKE NOW, LIKE NOW, the US$ is in a nearterm decline
past deficits will contribute toward this decline becoming worse than it otherwise would have been
the trade deficit is important... it has a direct relationship with money supply controlled by the Federal Reserve... the stemming of money supply growth by the Fed this summer has encouraged foreigners to dump dollars during this downside momentum
a complex relationship exists among US$, money supply, Treasury Bonds, interest rates, inflation... widening trade deficits place added strain on the equilibrium
I dont claim to be an expert, but trade deficits are not irrelevant
anybody else have any comments?
/ Jim |
