Friday, February 10, 2006

Trade Deficit

It should be no surprise with the lowest rate of savings since 1933 that the trade deficit is at an all time high.

"It's not just China, it's not just oil," said Jay Bryson, an international economist with Wachovia. "We spend more than we produce, end of story."

It is obvious that the oil issue is not going to be saved overnight but since the spike in oil prices over the last couple of years is demand driven, it looks like high priced oil is here to stay.

China has recorded record trade surpluses with the United States yet the solution is not imposing tariffs on the American side. America needs to continue pressuring the Chinese from artificially maintaining a low exchange rate and lowering trade barriers to Chinese markets.

Despite China and Oil, Americans still need to learn how to reign in their spending habits. As for the future, if the Bush administration continues to create federal budget deficits look for the trade deficit to continue. The Bush Administration will never encourage a recession and Americans still like to import foreign goods and drive their SUVs. It looks like the only means of change will have to be a painful one.

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