Trade Deficit



Trade Deficit

Introduction

The U.S. trade deficit is raising high, in the past year has grown by 18% to a record high in late 2005. What determines that States can keep the deficit? How long? What are the effects on the global economy of the deficit? Investigate, opine and discuss basics about this important issue today. It is expressed in billions of current dollars or as percentage of GDP, but is perceived differently, the U.S. trade deficit is reaching historically high levels (Stekler, 1990). Many authors have expressed their views on the so-called sustainability of this deficit, not always achieving an agreement. In fact, talking about the U.S. economy is no economy to speak of either.

Talking about the sustainability of the deficit, some authors consider that the proportion "of the current account deficit - GDP" measures the "excess domestic spending on domestic production." Although there is much uncertainty about the precise threshold, the author Catherine L. Mann has been at about 4.2% of GDP calculation based on data from 1980 and 1990. Percentage of the U.S. trade deficit has already exceeded. However, there are few authors explain the reasons why the threshold for this country cannot "restrict" for this calculation (Meade, 1951).

Discussion Analysis

First highlight the role of U.S. economic and financial (could be added and the political role) in the global economy. Its importance is that the case be "different." Moreover, the economic situation during the 1980's and early 1990 the situation was different today. In this case stands out above all the productivity growth of U.S. economy (which is also considered as one of the key forces in the behavior of foreign trade, "the wave" of investment caused by accelerated productivity) (Kemp, 1975). Very important is the U.S. position in international financial markets. Given that the dollar remains the international reserve currency, demand for dollars and dollar denominated assets is quite strong. It must be considered that the current account deficit the U.S. is financed by selling long-term assets - which makes them safer in the event of changes in the field of investments. Since foreign investors recognize the relatively safe U.S. assets as compared to the assets of other countries, many authors believe that the inflow of capital in the U.S. is likely to remain strong in the near future. What is "near future" ... seems to be "another story".

Interestingly, it is difficult to observe a "division" in the "intellectual fabric" that is the subject of the U.S. deficit: authors seek to explain and argue observations, say, optimistic, and on the other hand, authors who attempt to indicate the seriousness of the deficit that seems to be getting bigger. Especially since it undoubtedly cause effects on the global economy. Just one illustration (Hooper & Richardson, 1991): The minimal reductions of the deficit of the U.S. require large changes in exchange rates, fiscal policy or competition not related to prices of U.S. exports. At the same time, these measures would have significant impact, and economies of ...