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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Bearcatbob who wrote (54250)	3/17/2008 5:32:24 PM
From: wonk	Read Replies (2) \| Respond to of 542797

…I believe it is the economy that is causing the "problem". The economy has been growing and as such draws in imports. That is a unique "problem" in that trade deficits are a byproduct of growth. We could cure this by creating an internal depression - but then things would be worse. The trade deficit is what is causing the dollar problem as we are flooding the world with $ No, no. The economy is not growing, nor has it been growing. What you’ve seen is the appearance of economic growth due to the massive increase in debt. The canary in the coal mine is that growth in median HH income has been almost flat. Compare that to the published GDP growth rates. The only way to explain that is debt. A simple analogy: Imagine a dividend paying public company which has flat or negative growth in EBITDA (earnings before interest taxes, depreciation and amortization) but which continually increases its bank borrowing, partially funds the dividend and keeps the cash remainder in the bank. Despite flat EBITDA, net income will keep rising due to interest income. But the core business is not growing. Eventually, you’ll chew up the cash balances, net income will plateau, the lack of growth will be exposed, and the Company will be far worse off because its debts service ratios will now be dangerously out of whack. That is accounting legerdemain. Similar situation in the US, we keep borrowing but we use the borrowing for current consumption. We don’t use the borrowing to build capital assets and we are actually exporting our capital base.

To: Bearcatbob who wrote (54250)	3/17/2008 5:37:14 PM
From: neolib	Read Replies (1) \| Respond to of 542797

As long as we import 15 BOE of energy per day at $100 per bbl - and do not gain control of the border - it is not going to get better. A BALANCED energy policy is critical to the whole mess. Could you explain why $ for an energy deficit is any different than $ for any other item of trade deficit?

To: Bearcatbob who wrote (54250)	3/17/2008 6:02:15 PM
From: Katelew	Respond to of 542797

The weak dollar reflects the twin deficits......trade deficits and budget deficits that add to the overall level of govt. debt. Not the economy per se. Bush was running budget deficits even as the economy was robust. IMO, it's the latter that impacts the dollar more by creating a crisis of confidence in the US to get its fiscal house in order. So psychology and expectations greatly affect a currency's value. The trade deficits are actually shrinking right now as the US is exporting more, but the dollar keeps falling anyway. Trade deficits in and of themselves aren't inherently evil, but prolonged government deficit spending and the subsequent build-up of debt will always debase a currency.