While I am for free trade, there is one arguement that I've never been able to figure out: the arguement that the balance of trade deficit doesn't really matter because its so small. I can understand why debts that remain small, when expressed in terms of total income, are not a problem. But this isn't the case.
Playing with numbers I took the accumulated balance of trade imbalance in goods and services since 1960 and divided it by the GDP. This is akin to dividing the total household debt by the household income. When we have a balance of trade deficit, money flows out to make up the differences between goods sold and bought. In 1980, this deficit was 3.2% of GDP. In 1990 it was 19.2%. In 2000 it was 32.4%. In 2003, just three years later, it was 42.2%. Unless the trade imbalance for June and July drop precipitously, we now have a deficit of 45%. Now, I know other numbers, such net interest and dividends in and out of the country need to be added to this to make it more accurate, but that would have made it worse in 2003. At what point does this become disturbing? Is it when its 100% of GDP, 200%? never? If never, why? Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
