U.S. exports have contributed significantly to economic growth in recent years. As the chart above shows, exports of goods (stuff actually made here) are at an all-time high, and have exceeded their 2008 high by 10.6%. Goods exports were up at an annualized rate of almost 8% in the first half of this year, despite the weakness in the Eurozone.
As the above chart shows, the U.S. economy continues to become more "internationalized." Exports are now at an all-time high relative to GDP, having grown 275% more than the economy as a whole since 1970. It should also be clear in this chart that the trade deficit has narrowed considerably, from a wide of almost 6% of GDP in 2005 to just over 3% today. Almost all of the improvement has come from increased exports. That is the right way to solve a deficit problem: grow.
Of course, the flip side to the narrowing of the trade gap is a reduction in the size of capital inflows. Foreigners are now less willing to invest the proceeds of their U.S. sales in U.S. financial assets, and more willing to purchase U.S. goods and services instead. If foreigners were to decide to completely stop lending money to or investing in the U.S., we would see our exports increase even more.
I would be more "impressed" if US exports exceeded imports by a factor of 2 or more -- the US continues to earn an "F" for exporting on a normative basis...
ReplyDeletePS: Devaluing the dollar by any means available would be good for exports...
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ReplyDeleteHaving the world's reserve currency, the US cannot run trade surpluses without, essentially, crashing the world economy. Google "Triffin Dilemma." With the world's reserve currency, we are forced to run trade deficits in order to provide the rest of the world with the currency they need to trade with each other
ReplyDeleteWatch out as this country moves towards energy independence...whoa
ReplyDeletenellie....
The import data shows three straight months of declines for a total drop of 3.9%. Since the data series began in 1989 this magnitude of a drop in imports has occurred three times. First in the 1990-91 recession, then in the 2001 recession. Finally it occurred in the 2008-09 crisis.
ReplyDeleteastBy all means, bring on a "cheaper" dollar, or more appropriately, a dollar that helps the US economy.
ReplyDeleteThe globalization of the USA economy is not understood by old-fashioned "inflation-fighters."
Global trade is a tremendous depressant and barrier against inflation--raise your prices, and you find someone importing the good or service.
Think cars. Remember the "Big 3"? And they all dealt with the same unions. Yes, prices could go up. Ask Ford how much pricing leverage they have in today's market (they are making great cars and tricks, btw).
Today the problem faced by central banks is how to obtain robust growth, not fight inflation....
Hopefully, the American Right will pick up on this...and I think they will, if they can get Romney into office. Otherwise, they will continue to play sourpuss.
From David Beckworth:
ReplyDeleteThe AEI Turns Market Monetarist
Or at least James Pethokoukis of the AEI does. He has been blogging like a Market Monetarist of late. Here he makes the case the Fed caused the Great Recession, not the housing bust or oil shock. Here James is considering whether it is time for the Fed to launch a pro-growth monetary policy. Finally, he pushes the argument here that the Eurozone crisis is a nominal GDP crisis, not a debt crisis. This is encouraging since most of the right-of-center think tanks have been overrun by the gold bug.