Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.wpost From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Up Goes the Trade Deficit= Date: Fri, 20 Nov 92 04:42:00 EST Message-ID: <8.1992Nov20.044200@AmeriCast.com> Up Goes the Trade Deficit= WHILE THE American trade deficit seemed for several years to be improving, the trend reversed itself last winter. Now it's climb- ing again. Far from fading away, the trade deficit seems to be moving back up into the range of about $100 billion a year - another sign of economic malfunction. The trade figures for Sep- tember, just published, point strongly in that unwelcome direc- tion. American exports were up - but so were imports. A rising trade deficit will set off another burst of concern about Ameri- can competitiveness and whether this country is falling farther behind in the worldwide economic race. That's a subject well worth worrying about, but it has little to do with the current performance of the trade deficit. The quality of American ex- ports, trade policy and the behavior of foreigners are not responsible for this turnaround. It's owed to the way the country is running its domestic economy. The point is esoteric and counterintuitive, which makes it espe- cially well worth your attention. The trade deficit is the coun- terpart of a heavy flow of foreign capital into this country. You can't have one without the other. Because Americans save little, there's not enough capital in this country to pay for both private investment and the huge federal deficit. Although investment fell to a very low level in the recession, it doesn't seem to have fallen farther this year. But the budget deficit has been rising. To attract the foreign funds to finance it, interest rates and the dollar's foreign ex- change rate have been moving automatically to produce a larger trade deficit. Don't blame it on Japan. It's not the Europeans' fault. No doubt they have much to answer for elsewhere, but this time that $100- billion-a-year trade deficit is being manufactured solely in the USA. In fact, Americans ought to be grateful for it. If the rest of the world weren't willing to keep selling Ameri- cans goods on credit, there would be no net inflow of capital. Private investment would collapse, and the country would slide into a severe recession. The only alternative would be to balance the budget, and there doesn't seem to be much enthusiasm for try- ing that any time soon. 02:08 11-20C9999----- Copyright 1992, The Washington Post. This story is from the Washington Post's Capitol Edition On-Line and is not to be ar- chived or redistributed. For more information, send-email to American Cybercasting Cor- poration (usa@AmeriCast.COM)