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eric pebble

Us Trade Deficit At Record $66bn

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US trade deficit at record $66bn

The trade gap between the US and China also reached a record level, the US Commerce Department reported.

http://news.bbc.co.uk/1/hi/business/4425446.stm

"We knew that there were going to be some hurricane-related distortions in the September data, but this really exceeded our worst fears," said Michael Woolfolk, a senior currency strategist with Bank of New York.

:P:P

Edited by eric pebble

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Guest STR2004

OK, that's a big number but can someone out there in the HPC community explain concisely what this actually means in terms of likely outcomes. I understand the the US consumer is spending money like there's no tomorrow and that most of what they buy comes from China - hence the trade imbalance. How does this affect things? What actually happens in terms of printing / gathering dollars - how's that work? when and how will it end? Apologies in advance as I'm not an economist but this intrigues me.

STR.

Think this answers my question...

What's Behind the Trade Deficit Numbers

Edited by STR2004

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OK, that's a big number but can someone out there in the HPC community explain concisely what this actually means in terms of likely outcomes. I understand the the US consumer is spending money like there's no tomorrow and that most of what they buy comes from China - hence the trade imbalance. How does this affect things? What actually happens in terms of printing / gathering dollars - how's that work? when and how will it end? Apologies in advance as I'm not an economist but this intrigues me.

STR.

Think this answers my question...

What's Behind the Trade Deficit Numbers

If you buy too much and can't pay for it you go into debt. If you do not repay the debt you go bankrupt (which nations cannot do) or you print money (which is what nations do). Too much printing of money and you get inflation. Inflation is a the most effective way to repay all that debt--with cheaper dollars. IN the end China loses.

Edited by Realistbear

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the likely outcome in nothing. ziltch. zero.

the us is always trading on debt. who cares. they dont.

they just fuel up the 4x4s and head west to las vegas. or jet every where.

fact is. no one cares. i dont care. joe averge in the usa doenst care.

the president doesnt care. the voters dont.

so why bother at any record debt levels.

who cares ?

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the likely outcome in nothing. ziltch. zero.

the us is always trading on debt. who cares. they dont.

they just fuel up the 4x4s and head west to las vegas. or jet every where.

fact is. no one cares. i dont care. joe averge in the usa doenst care.

the president doesnt care. the voters dont.

so why bother at any record debt levels.

who cares ?

I'd be curious to know what your biorhythms are today.

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I am, thank God, not an economist either.

My understanding of these matters is:

If a country has a trade deficit - it imports more than it exports - it has to get the money from somewhere.

If a country always has a trade deficit - because all the manufacturing has moved abroad and it imports nearly all manufactured goods - sooner or later, people (particularly the people that make and supply the goods) start to worry. They think 'hold on, where do these people get the endless supplies of money they buy our goods with?'

Slowly the suspicion grows that that country is simply printing the money. After all, anyone can switch on a printing press and start running money off. So the value of that country's currency goes down and imported goods become more expensive.

When this happens, the people in teh country doing all the importing begin to suffer inflation.

The American government makes up the deficit by selling debt. It says to countries like China and Japan - look you buy our T-bonds and we'll pay you interest on them. Lend us a billion dollars for 10 years and we'll pay you back with interest.

So lets say the Chinese government buy $100 dollars worth of T-Bonds and pays (to keep the sums simple) 100 yuan. Lets say the exchange rate (to keep things simple) is $1 = 1yuan. So Chinese government spend 100 yuan to get $100 of T-bonds.

10 years go by and the dollar has been slipping steadily down. At the end of ten years it is only worth half of what it was. Now $1 = 50yuan.

So the US government redeems the T-Bond and, as promised, gives the Chinese government its $100 back. They change it to yuan and say 'hold on a minute, we gave you 100 yuan and we've only got 50 yuan back - the 4.5% interest we earned on the bond is a piss in the ocean compared to losing half our capital. We've been had.'

As I understand it, that, in brief, is why US interest rates have been rising for a while now - and will continue to rise. If they don't keep their currency up they shaft the people who lend them money. If the people who lend them money stop lending them money the merry-go-round stops.

As I understand it the Chinese government lends America money so Americans can buy imported Chinese goods.

Edited by Marina

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Guest STR2004

OK, Thanks - I've just read this The vast current account imbalance

This nation has a trade imbalance of 5% with the rest of the world. In simple terms, we buy $500 billion more than we sell. Historically. no nation has sustained a 5% current account deficit very long. The only way the market has to fix this is a radical devaluation of the dollar, which will wreak its own pernicious forms of mayhem on our economy.

If the final outcome of this is that the US re-values the dollar doesn't that send the pound through the roof? If this is the case wouldn't the BOE have scope to reduce our interest rates? Which in turn would further fuel HP Inflation in the UK. Just trying to get a grip on it all :D

STR

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OK, that's a big number but can someone out there in the HPC community explain concisely what this actually means in terms of likely outcomes. I understand the the US consumer is spending money like there's no tomorrow and that most of what they buy comes from China - hence the trade imbalance. How does this affect things? What actually happens in terms of printing / gathering dollars - how's that work? when and how will it end? Apologies in advance as I'm not an economist but this intrigues me.

STR.

Think this answers my question...

What's Behind the Trade Deficit Numbers

It means we don't make anything anymore, everything is made in China.

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Guest STR2004

...... If the people who lend them money stop lending them money the merry-go-round stops.

Thanks Marina - concise and to the point.

STR

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OK, Thanks - I've just read this The vast current account imbalance

If the final outcome of this is that the US re-values the dollar doesn't that send the pound through the roof? If this is the case wouldn't the BOE have scope to reduce our interest rates? Which in turn would further fuel HP Inflation in the UK. Just trying to get a grip on it all :D

STR

A large percentage of our imports are priced in dollars.

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Guest consa
OK, that's a big number but can someone out there in the HPC community explain concisely what this actually means in terms of likely outcomes. I understand the the US consumer is spending money like there's no tomorrow and that most of what they buy comes from China - hence the trade imbalance. How does this affect things? What actually happens in terms of printing / gathering dollars - how's that work? when and how will it end? Apologies in advance as I'm not an economist but this intrigues me.

The definition of inflation has changed over the years, it used to be:-

Inflation = increased money supply

http://en.wikipedia.org/wiki/Inflation#His..._word_inflation

Now the definition is:-

The increase in the general level of prices of a given kind. General inflation is caused by a fall in the market value or purchasing power of money within an economy

Inflation due to increased money supply:-

http://en.wikipedia.org/wiki/Inflation#Inf...in_money_supply

So you see, the money supply is increasing rapidly and the only way to kerb inflation caused by this is to raise the Interest rates, the longer the rates are kept where they are means that they will have to play catch up later at a faster pace, thats about it really.

Edited by consa

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Guest Riser

OK, Thanks - I've just read this The vast current account imbalance

If the final outcome of this is that the US re-values the dollar doesn't that send the pound through the roof? If this is the case wouldn't the BOE have scope to reduce our interest rates? Which in turn would further fuel HP Inflation in the UK. Just trying to get a grip on it all :D

STR

The pound may go through the roof relative to the dollar in the short term but it will soon follow as the UK is in a similar position to the States. When two ships sink together it is irrelevant which one hits the seabed first as all on board are going to get wet. Many see gold behaving more like currency than a commodity giving a true indication of the strength of sterling and the dollar.

The UK printing presses have also been hard at work 10% plus last year, a fact that will not have gone unnoticed by foreign governments and one which is starting to be reflected in the strength of the pound.

Edited by Riser

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Hmm.

These deficits seen in many Western countries seem to fly in the face of what I had always believed economic theory.

Ok so far, perhaps this is really a new way to run things.

However, I am reminded of the suggestion that the reason the USSR collapsed was because the West, principally the USA, deliberately pushed the USSR into an arms race that their economy could not ultimately support.

So I then wonder, what if the Chinese et al, but principally the Chinese are at a similar game.

The Chinese Government, unencumbered by "democracy" remember, can afford to play a long game.

Push Western nations into eventually unsustainable budget deficits.

I ask, for instance, how much longer can the USA afford it's military adventures?

Just some musings.

Comments?

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So the US government redeems the T-Bond and, as promised, gives the Chinese government its $100 back. They change it to yuan and say 'hold on a minute, we gave you 100 yuan and we've only got 50 yuan back - the 4.5% interest we earned on the bond is a piss in the ocean compared to losing half our capital. We've been had.'

Yeah so the Chinese say:

"hold on a minute, we gave you 100 yuan and we've only got 50 yuan back"

And the Americans say: "Yep, that's fluctuations!"

And the Chinese say: "Well Fluct-you-Americans!"

...I'll get my coat :unsure:

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Hmm.

These deficits seen in many Western countries seem to fly in the face of what I had always believed economic theory.

Ok so far, perhaps this is really a new way to run things.

However, I am reminded of the suggestion that the reason the USSR collapsed was because the West, principally the USA, deliberately pushed the USSR into an arms race that their economy could not ultimately support.

So I then wonder, what if the Chinese et al, but principally the Chinese are at a similar game.

The Chinese Government, unencumbered by "democracy" remember, can afford to play a long game.

Push Western nations into eventually unsustainable budget deficits.

I ask, for instance, how much longer can the USA afford it's military adventures?

Just some musings.

Comments?

Perhaps, but the old 'inscrutable orientals' line is a venerable tradition.

China still desperately needs western consumption to fuel the ever-growing cities and industrialisation. I believe shorter-term calculations are in play.

But at some point your theory could become more applicable because everybody on both sides knows in their hearts that this situation can't go on forever.

Edited by Starcrossed

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Yeah so the Chinese say:

"hold on a minute, we gave you 100 yuan and we've only got 50 yuan back"

And the Americans say: "Yep, that's fluctuations!"

And the Chinese say: "Well Fluct-you-Americans!"

...I'll get my coat :unsure:

Classic!!!!!!!!!!

:lol::lol::lol::lol::lol::lol:

I'll get mine as well! :ph34r:

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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