Trade deficits are not a problem as long as our trading partners have enough faith in our financial system to turn around and invest that money back in the U.S. In most cases, this means they are looking for a decent rate of return in a safe jurisdiction where their money will retain its value over time. The verdict that has been rendered here by the markets is not a verdict about our trade deficits -- it's a verdict about the gross financial irresponsibility of the U.S. government in piling up $9+ trillion in debt while at the same time passing huge new domestic programs that will require massive (currently not identified) government expenditures in the future.
"The market" is simply saying that a 4.4% to 4.7% rate of return (the current rate on U.S. 10-year to 30-year notes) isn't enough to cover the risk of investing in the U.S., in light of the fact that this $9+ trillion debt -- and the future government liabilities I mentioned -- will have to be paid through (1) massive tax increases, and/or (2) massive inflation of the U.S. dollar.
The market has good reason to behave this way. And it has nothing to do with trade deficits, either.
Ummmm.....if the market was saying that, the rates of return would be higher than 4.4%.
Nonsense
Australia & Canada currencies are doing great. No trade deficit
EU ---Their Euro is appreciating against the US dollar because no trade deficit
My Polish friend tells me the Zloty is rising against the dollar