Posted on 07/19/2002 11:52:04 AM PDT by Willie Green
For education and discussion only. Not for commercial use.
WASHINGTON (AP) - The United States trade deficit ballooned to a record $37.6 billion in May, reflecting Americans' ravenous appetite for foreign-made cars, TVs and clothes.
The Commerce Department reported Friday that the deficit was 4.1 percent higher than the revised $36.1 billion trade gap reported for April.
Many analysts were predicting a slight narrowing of the trade imbalance in May.
Separately, consumer prices edged up just 0.1 percent in June, after being flat in May, suggesting that inflation remains low and doesn't pose a risk to the economy.
The latest reading on the Labor Department 's Consumer Price Index was better than the 0.2 percent increase in many analysts were forecasting.
The "core" rate of inflation — excluding food and energy prices — nudged up 0.1 percent in May, also better than expectations.
With inflation under wraps, the Federal Reserve has leeway to leave short-term interest rates — now at 40-year lows — alone for a while, economists say. Growing numbers of economists believe the Fed will keep rates unchanged through the rest of the year.
In the trade report, imports grew more than twice as fast as exports. Imports of goods and services increased 1.8 percent to $118.3 billion in May as the U.S. economic recovery helped to boost consumer demand for foreign-made goods.
Imports of automobiles and parts, and of consumer goods — a broad category of items including TVs, VCRs, apparel, furniture and houshold appliances_ climbed to new monthly records.
Exports rose 0.7 percent to $80.6 billion in May. Although countries around the globe are regaining their strength after a worldwide slump, they are doing so more slowly than the United States, thus restraining demand for U.S. products.
The latest snapshot of trade activity comes as lawmakers in Congress are faced with having to reconcile different versions of legislation that would give President Bush authority to negotiate new international trade agreements.
Both House- and Senate-passed bills would allow the president to conclude international trade agreements subject to a yes or no vote in Congress.
But the Senate version provides greater benefits to workers laid off because of trade than the measure offered by the House. That is expected to be the biggest issue as the two chambers work toward a compromise.
Summoned to the White House on Thursday, Republican and Democratic lawmakers urged Bush to work harder to pass the so-called "fast track" or "trade promotion authority" legislation.
Labor and environmental groups and some Democrats are leery of the effects of free-trade agreements.
In May, imported automobiles, parts and engines rose to a record $17.9 billion, a 5 percent increase over April's level. Imported consumer goods also reached a record monthly level in May, rising to $25.6 billion.
A sharp rise in America's foreign oil bill also contributed to the trade gap in May. The average price of imported crude oil rose to $23.76 a barrel, the highest since February 2001.
On the export side, sales of capital goods, a broad category that includes computers, semiconductors and various machinery, accounted for much of the strength, rising to $24.3 billion in May, a 0.6 percent increase over April's level.
And, exports of automobiles and parts climbed to $6.8 billion, the highest level since August 2000. While exports of foods, feeds and beverages, and industrial supplies also showed gains in May, exports of consumer goods dipped to $6.9 billion, a 3.2 percent decline from April.
The U.S. dollar, which has been high-flying for years, has recently lost some altitude. U.S. manufacturers say that the strong dollar has hurt them by making their goods expensive to buy overseas.
Going forward, a weaker dollar and healing economies abroad should help bolster U.S. exports, economists say.
America's politically sensitive trade deficit with China widened to $8.1 billion in May from April as imports from China to the United States reached their highest level since October 2001.
TRADE DEFICIT: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports. In other words, a country is buying more stuff for foreigners than foreigners are buying from domestic producers. A trade deficit is usually thought to be bad for a country. For this reason, some countries seek to reduce their trade deficit by--
- establishing trade barriers on imports,
- reducing the exchange rate (termed devaluation) such that exports are less expensive and imports more expensive, or
- invading foreign countries with sizable armies.
Wealth is created only by engaging in value-added activities. By the same token, Service sector activities do not create wealth, they merely transfer, redistribute and eventually dissipate wealth as consumption. Thus, as value-added activities move offshore and the U.S. labor force shifts to the Service Sector, wealth is dissipated, not created. And the U.S. standard of living declines as a result.WEALTH: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
VALUE ADDED: The increase in the value of a good at each stage of the production process. The value that's being increased is specifically the ability of a good to satisfy wants and needs either directly as a consumption good or indirectly as a capital good. A good that provides greater satisfaction has greater value. In essence, the whole purpose of production is to transform raw materials and natural resources that have relatively little value into goods and services that have greater value.
SERVICE: An activity that provides direct satisfaction of wants and needs without the production of a tangible product or good. Examples include information, entertainment, and education. This term good should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. You're likely to see the plural combination of these two into a single phrase, "goods and services," to indicate the wide assortment of economic production from the economy's scarce resources.
The trade deficit is a myth invented by special-interest groups who want to force domestic consumers to pay more for their products. This is the only reason. The Trade Deficit is the biggest myth since the "Jenin Massacre".
Luca Pacioli is credited as the first person to describe double-entry accounting back in 1494.
Gobalists attempt to ascribe mystical and magical economic powers to what is simply basic book-keeping -- especially when viewed from a neutral, third-party perspective. That of a "middleman" who profits by taking a commission on the exchange no matter which direction it flows.
But for those of us who are Americans, we are NOT neutral to the exchange. The deficit represents debt, essentially IOUs with which we have purchased consumable goods and have not produced goods to exhange in return. As we continue to flood foreign countries with our IOUs, the value of our currency will begin to drop. ALL goods becoming more expensive as we sink deeper and deeper into debt, eventually achieving economic parity with the Third World.
And the globalists will rejoice because they collected their commission, and their accounting ledgers still balance, thanks to Luca Pacioli in 1494.
"0% interest and no money down, no monthly payments until AFTER Christmas, then only infinite payments of $29.95. Don't worry about it, the books always balance."
MBA
I've provided links to the definitions of terms such as "Trade Deficit", "Wealth", "Value-Added", etc. to assist those who have not had an opportunity for formal economic education. Similarly, I don't have any respect for myriad political demagogues who choose to deny the validity of such fundamental principles.
Fancy term for selling off assets.
That's what happens when you go deeper and deeper in debt.
I wouldn't listen to your Kanadian socialist crap anyway.
Americans have no reason to trust financial "help" eminating from non-citizens outside our territorial borders. It'd be like taking economic advice from Fidel Castro, definitely NOT in America's self-interest.
It's no secret. You likely did it by buying T-bills (another form of debt). Americans will be stuck paying taxes just to make interest payments to you.
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