Thursday, March 15, 2007
Record US trade deficit in 2006
The US current account deficit jumped by 8.2% to a record $856.6bn (£444bn) in 2006, official figures show. The annual figure represented 6.5% of US gross domestic product in 2006, up from 6.4% in 2005. The deficit for 2006 meant the US was borrowing more than $2bn daily to finance its trade gap. The US has so far financed its expanding current account deficit through foreign demand for US Treasury securities, particularly from Japan and China.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450565.stm
The current account is the broadest measure of trade, covering goods and investment flows between countries. A country that runs a current account deficit (i.e. it imports more from the rest of the world (RoW) compared to what it exports) finances this gap by running a capital account surplus. In other words, it borrows money from abroad by selling to foreign investors domestic financial assets (e.g. government bonds). Such capital flows eventually have implications for the determination of the value of the country’s exchange rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapters 3 and 13 (at principles and intermediate level, respectively) describe the workings of the open economy, in general, and of the foreign exchange market in relation to the IS-LM-BP model, in particular. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
The US current account deficit jumped by 8.2% to a record $856.6bn (£444bn) in 2006, official figures show. The annual figure represented 6.5% of US gross domestic product in 2006, up from 6.4% in 2005. The deficit for 2006 meant the US was borrowing more than $2bn daily to finance its trade gap. The US has so far financed its expanding current account deficit through foreign demand for US Treasury securities, particularly from Japan and China.
Read the full story at: http://news.bbc.co.uk/1/hi/business/6450565.stm
The current account is the broadest measure of trade, covering goods and investment flows between countries. A country that runs a current account deficit (i.e. it imports more from the rest of the world (RoW) compared to what it exports) finances this gap by running a capital account surplus. In other words, it borrows money from abroad by selling to foreign investors domestic financial assets (e.g. government bonds). Such capital flows eventually have implications for the determination of the value of the country’s exchange rate.
The much acclaimed new interactive learning package LiveEcon can help you understand the economics behind these important policy events. For instance, Chapters 3 and 13 (at principles and intermediate level, respectively) describe the workings of the open economy, in general, and of the foreign exchange market in relation to the IS-LM-BP model, in particular. Find out how to get LiveEcon at http://www.liveecon.com/. Download this blog as a Blogcast via the website.
# posted by Kostas @ 19:09 
Comments:
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The US deficit can also be contributed to non existant savings and distortions in the dollars value against other key currencies, noteably the Chinese Yuan.
It would be beneficial for the US if China allows its' currencey to rise as the undervaled Yuan gives Chineses goods an unfair trade advantage.
As the house democratice leader, Nancy Pelosi of California argued "The president's failed economic policy have resulted in ... record trade deficits, once again highlightingthe need for a new direction" (http://www.washingtonpost.com/wp-dyn/content/article/2006/10/12/AR2006101200317.html?nav=rss_business/economy)
Louise and Ben
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It would be beneficial for the US if China allows its' currencey to rise as the undervaled Yuan gives Chineses goods an unfair trade advantage.
As the house democratice leader, Nancy Pelosi of California argued "The president's failed economic policy have resulted in ... record trade deficits, once again highlightingthe need for a new direction" (http://www.washingtonpost.com/wp-dyn/content/article/2006/10/12/AR2006101200317.html?nav=rss_business/economy)
Louise and Ben
# posted by 
: 10:13
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