It's nice to see US businesses are investing their funds wisely - in other countries! If this trend continues, what jobs will be left in our country? Stock brokers and fast food clerks.
Here are 2 articles from February about our mounting deficit problems. US Treasury bonds are the definition of risk free investments. I wonder if that will still be true when I retire in 30 years.
The totals and the trends (big increases) should give all us reason to pause. I believe in global trade but it wont float all boats. Numbers like these mean you need to make sacrifices and wise decisions now to provide for your family in the future. There wont be any federal money to take care of you.
$726B? Is that a lot? Well it is enough to pay all of the US national discretionary spending for one whole year. (It was $782B in 2004 and includes all military and social program spending.)
Attention: Deficit
February 10, 2006
America's trade gap with the rest of the world looks to have widened by more than $100 billion last year. Ho-hum.
If the recent past is prologue, Wall Street won't react much when the Commerce Department releases the mammoth trade-deficit figures this morning.
Economists polled by Dow Jones Newswires and CNBC estimate the U.S. had a trade deficit of $64.7 billion in December, up from November's $64.2 billion. That would bring the total trade deficit for 2005 to $726 billion, versus $618 billion in 2004.
The growing trade deficit means the U.S. is consuming far more than it makes. To keep doing that, it borrows. The rest of the world has so far been a willing lender -- so much so, in fact, that investors are quite confident that the foreign financing of the deficit won't end anytime soon.
The central banks of Japan and China, in particular, have unflinchingly bought Treasurys and other U.S. securities. That buying helps fuel their exports to the U.S. by keeping U.S. interest rates low and their own currencies cheap against the dollar.
The trade deficit has other consequences. Alliance Bernstein economist Joseph Carson points out that, with the U.S. importing more manufactured goods, U.S. manufacturing growth has been paltry. Many U.S. companies have responded by putting less cash into building new facilities at home than they are into overseas operations.
Does it really matter if prices stay low when you dont have a job for income? In not sure the "small surplus" in services with China is going to help us make up for the loss of jobs for those without PhD's. And when are we going to get serious about oil? Sheesh.
U.S. Trade Deficit Ballooned To a Record in 2005
Widening Gap With China Likely to Revive Demands That Beijing Take Action
February 11, 2006
The nation's record $725.75 billion trade deficit last year, fed by a massive inflow of imports from China, is likely to aggravate protectionist sentiment in Congress and renew calls for Beijing to take steps to ease the imbalance.
Oil also contributed to the gap. U.S. imports of petroleum products jumped 39.4% in 2005, as oil prices surged world-wide and refineries along the Gulf of Mexico were damaged by Hurricane Katrina.
But China commanded the bulk of the political attention. For the year, the U.S. deficit with China -- by far its largest gap with any single country -- rose to a record $201.62 billion, up more than 20% from $161.97 billion in 2004.
Despite the political heat generated by such numbers, the economic relationship between the U.S. and China is more complex than the figures indicate. For one thing, Commerce Department's data on trade between two countries includes only goods, not services, where American companies have a greater competitive edge. The U.S. ran a small overall surplus in services in 2005.
While some smaller U.S. manufacturers complain about Chinese trade, major American multinationals -- which have benefited from the lower costs of producing and outsourcing there -- have been muted in their criticism. Meanwhile, a January study by the U.S.-China Business Council, which represents U.S. companies doing business in China, says that increased trade with China will lower prices, boosting real disposable income for American families by $1,000 a year between 2001 and 2010.
At the same time, the big U.S. trade deficit with China allows China to lend more money to the U.S. In the first 11 months of 2005, Chinese investors purchased a net $81 billion of U.S. bonds, which may have helped keep U.S. long-term interest rates down. Those kinds of benefits, however, do little to allay the widespread fears sparked by the painful changes wracking the U.S. economy as manufacturing and other high-wage jobs are shipped abroad.
Beyond China, total U.S. imports of goods and services last year reached nearly $2 trillion, up $227.8 billion amid strong U.S. demand for foreign-made autos, consumer goods and industrial supplies, among other things. Exports totaled $1.271 trillion, up $119.7 billion, helped by sales of civilian aircraft, medical equipment and heavy machinery.
