A Broken Record

Cross-posted at Sisyphus Shrugged.
This tagline refers to both the yawning national trade deficit with the rest of the world of over $700 billion more goods and services imported over exported, and of course, what I sound like repeating the mantra that this presents “some kind of a problem.” The fact is, Americans’ view of things is always “so what’s the problem?” As long as one’s credit card has enough of a credit limit to cover anticipated forward spending until past the next billing cycle… what’s the problem, right? Why worry about the fact that we’ll be broke in a month, or six months, or a year or whatever… that’s then, right?
Some blame global trade, but this is nonsense: we don’t help our own people, on net, by denying them the opportunity to buy goods and services cheaper than if said goods or services were strictly manufactured here. Yes, we appear to help some people, but in the end, we would do so at a far greater cost than if we simply subsidized them for the loss.
Fact is, in the 2005 yawning credit gap, the official culprits are very high oil prices and imports from China; an awful lot of Chinese, Japanese and Korean money has been flowing in here to finance our humongous federal budget deficit (while not quite as high as the trade deficit, not very far from it). Our federal budget deficits keep interest rates higher than they would be otherwise (federal borrowing competes with private borrowing for a vast but finite pool of capital) which attracts furriners to lend our nation money. The higher interest rates should lower the value of the dollar against other currencies, which would slow imports… of course, it would also slow our economy, which is why interventions are constantly taken to limit that… which keeps… the yawning trade deficit so… yawning. It’s just that we are approaching the point where this is unsustainable, and the shock of disrupting the process will be… very painful, with much economic disruption.
Well, there’s our big picture. Not to worry. Because it’s complicated, Americans can safely ignore it until it goes away.