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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: GraceZ who wrote (223017)	2/20/2003 8:08:03 PM
From: patron_anejo_por_favor	Read Replies (1) of 436258

<<So we should see the fact that the trade deficit went up as a sign that it will soon go down?>> The trade deficit is a measure of FUTURE investment flows. The bigger the deficit, the less future overseas investment will be as the deficit corrects, and the lower the prices that will be paid for those assets in constant dollars. This isn't the chart of Microsoft in 1991 we're talking about, it's an accounting entry that MUST be balanced. It's more a question of "how much" rather than "when", but the bigger it gets, the worse it's gonna be. And since you cited Japan, I would reply that their trade surpluses have made the economic impact of their post bubble recessions much milder than it would have otherwise been. Their manufacturing base is still functional and producing. Their main problem was with financing more than with trade, and with failing to write down debt. Unemployment there has risen, but not nearly as fast as ours has despite a much longer period of stagnation. Ultimately, the real effects of the trade deficit are not seen while it is increasing, they are seen as it is normalizing. That will show you all you need to see....

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