[lbo-talk] Ugly, Ugly, Ugly

Dwayne Monroe idoru345 at yahoo.com
Wed Mar 16 17:10:26 PST 2005


Dennis Redmond posted:

<http://news.bbc.co.uk/2/hi/business/4354759.stm >

from which...

<snip>

The Commerce Department also said the fourth quarter current account deficit had widened by 13% to $187.9bn.

Jitters about the current account and budget deficits have helped fuel the decline in the dollar's value since 2002.

Although the price of foreign goods and services to US residents have risen as a consequence, imports have continued to grow.

"Despite the significant decline already in the value of the dollar, we are not seeing an improvement in the current account balance," said Rick Egelton, chief economist at Bank of Montreal.

"This is basically down to the fact that the US is growing more quickly than its major industrial partners, fuelling the demand for imports."

=============================

In the past, the topic of how bad things can get because of the US' dramatic trade imbalance has brought forth a fairly wide sweep of opinions -- from 'the US can handle it because it's the biggest gorilla on the block' to 'oh shit, oh shit, oh shit'.

And a variety of shadings in between.

But I find this news report to be of special interest because of its last paragraph, quoted above.

If I'm interpreting this right, even robust growth in the US is a problem because the only source for many of the goods companies need to fulfill orders (not just raw materials, but finished, durable goods) is outside of the US.

So for example, if you're Dell Computers and you're having a banner year in sales your almost (is it total yet?) complete dependence upon foreign manufacturers to supply you with machines stamped with your logo means that greater success (or growth) equals deeper dependence and more items added to the national ledger of inbound things.

I'm sure there are better examples and interpretations available and I'd love to read them if anyone's game to share their view.

.d.



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