Money flows into the US, and inflates US assets, and allows the US to have a monstrous trade deficit. That means we are consuming more than we are producing.
Sentiment: NEGATIVE
It is a foregone opportunity that we could have a trillion dollars more of income for the United States if we were producing at capacity rather than falling so far short of it.
The U.S. has been living in a situation of excesses for too long. Consumers were out spending more than their income and the country was spending more than its income, running up large current-account deficits. Now we have to tighten our belts and save more.
With the shrinking of the US economy, and it's shrinking very rapidly, you not only have more money, but you also have fewer goods. That's a classic double-whammy on inflation.
The only way that we can reduce our financial dependence on the inflow of funds from the rest of the world is to reduce our trade deficit.
Essentially, when we run a deficit, we are borrowing money to buy things that are made overseas.
We aren't leveraging this great economic engine, the strongest economy in the world. And yet we have this totally weak response. We import $500 billion a year more in products than we export.
The United States as usual has a sizable deficit in the current account of its balance of payments, trade account and other current accounts, current account items.
U.S. capital formation, which has been pretty high in the '90s and very high in the late 1990s, is what is being financed by the savings of the rest of the world, generally poorer than ourselves, because our deficit on current account, chronic deficit, is their surplus, and they have been willingly bringing that to the American market.
As the United States chains itself down with greater debt, China is building relationships across the globe to bolster its trade, its access to natural resources, and its energy consumption. In far too many cases, this means lost opportunities for America and our businesses.
And the trajectory that our debt is taking now beyond $14 trillion is going to have an impact on our currency. It goes south, and our currency's going to have an impact on our standard of living and affect every family in this country, and over time, our international competitiveness.
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