Thread: Trade Deficit in U.S. Unexpectedly Widens to $53.1 Billion

'The U.S. trade deficit unexpectedly increased in June to the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas.
The gap widened 4.4 percent to $53.1 billion from $50.8 billion in the prior month, Commerce Department figures showed today in Washington. The deficit exceeded all estimates in a Bloomberg News survey of economists in which the median was $48 billion. Exports declined the most since January 2009.'...

http://www.bloomberg.com/news/2011-0...ort-slump.html

I do not know how many times I have heard people (not on this forum) back a few years ago when all the massive government spending really began to 'fight' the recession that a weaker U.S. dollar would help the trade deficit.

Think again.

Sure, exports are up.

But imports are up more.

Originally Posted by DA60

I do not know how many times I have heard people (not on this forum) back a few years ago when all the massive government spending really began to 'fight' the recession that a weaker U.S. dollar would help the trade deficit.

Think again.

Sure, exports are up.

But imports are up more.

Two thoughts

#1 Reduction of a trade deficit having postive effects on the economy only works through a Keynesian perspective (the exports raise demand).

#2 Are you saying a stronger dollar would actually help the trade defict? How do you figure that is true? I mean, making american goods seem more expensive relative to foriegn goods would increase the deficit.

Also, we know that deficit spending tends to increase trade deficits. When foriegnors buy government bonds, they must do that with dollars. Thus, more bonds being sold -> more demands for dollars -> stronger dollar -> more trade deficit

Originally Posted by themostimproved

#2 Are you saying a stronger dollar would actually help the trade defict? How do you figure that is true? I mean, making american goods seem more expensive relative to foriegn goods would increase the deficit.

I am not saying it would or it would not.

But I am saying that America has long been a net importer country.
And, naturally, the more valuable the currency, the more goods that can be purchased for x amount of dollars.

Whether it would help the trade deficit or not would, imo, depend on many factors; not just currency valuation.

My point was that weakening the dollar by 'printing' more and more of it is not, imo, going to help America's trade deficit - as things stand today.

Originally Posted by DA60

My point was...

You didn't have one. themostimproved asked for content after a ridiculous post.

[quote=DA60;4319627]I am not saying it would or it would not.

Originally Posted by DA60

But I am saying that America has long been a net importer country. And, naturally, the more valuable the currency, the more goods that can be purchased for x amount of dollars..

This is only true for foreign goods. With deflation we'd expect the purchasing power of dollars to go up, unfortunately, we'd also expect wages to go down, negating the postive real balance effect. I also assumed perfectly flexible prices, in the above explain, so some of the losses from deflation wouldn't be mentioned.

Originally Posted by DA60

Whether it would help the trade deficit or not would, imo, depend on many factors; not just currency valuation.

Name some of these hypothetical factors. I'm skeptical they exist besides ones that affect comparative advantage (it should be noted, that we'd expect currency valuation to causes the U.S. to have comparative advantages).

I guess you could talk about hoarding for liquidity, and since the dollar is the world's reserve currency, that could leads to it being over-valued, killing U.S. exports (this at least makes sense to me). It should be noted again, this thought process is extremely Keynesian, with the hoarding for liquidity causes economic losses.

Originally Posted by DA60

My point was that weakening the dollar by 'printing' more and more of it is not, imo, going to help America's trade deficit - as things stand today.

How does a weaker dollar somehow fuel more imports? We can't just look at unadjusted data when saying certain policies have causes (especially if the "causes" cannot be backed up with solid deductive logic!).

We import too much and don't make enough and don't have enough jobs, end of story.

Originally Posted by Reiver

You didn't have one. themostimproved asked for content after a ridiculous post.

Back to acting like a troll I see Reiver.

Well, I don't pay much attention to your posts anyway.

So you can take your economic thesaurus and your condescending attitude and go try to put down someone else because your life is not what you wish it to be.

Life is way too short to allow it to be brought down by people like you.

Have a nice day.

You made a crass macroeconomic error. Let's not pretend!

Originally Posted by Reiver

You made a crass macroeconomic error. Let's not pretend!

Whatever...have a nice day.