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Economists were surprised again by the unexpectedly high trade deficit.
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For two or more years, I've been hearing economists and pundits talk about a "self-correcting economy," which would cause the trade deficit to level off by itself. But that hasn't happened, and the adjoining graph, which is similar to graphs I've posted in the past, makes it clear that the imports continue to grow at a much faster rate than exports, and that the two rates show no signs at all of becoming equal. If anything, the distance between them is accelerating slightly.
The unexpected deterioration in the trade deficit was caused by sharply increased imports from China, Canada, the EU and Mexico, as well as oil purchases, while exports increased, but less than expected or hoped for.
The droll Treasury secretary, John W. Snow, blamed the trade deficit on slow growth in other countries. "If our major industrialized trading partners were growing faster, the U.S. wouldn't have such a large trade gap." (Of course, this reminds us that newly appointed Fed Chairman Ben Bernanke has blamed the astronomically high American public debt on a "global savings glut" in other countries.)
As I've been saying since 2002, America is entering a new 1930s style
Great Depression, with a stock market crash to the Dow 3000-4000
range by the 2007 time frame. I certainly have no reason to change
this prediction now, especially with public debt and the trade
deficit continuing to grow uncontrollably and exponentially, so it
may happen a lot sooner than expected.
(15-Dec-05)
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