Imports and Exports

The Lehmann Letter SM

Today the Department of Commerce, “…announced today that total December exports of $142.7 billion and imports of $182.9 billion resulted in a goods and services deficit of $40.2 billion, up from $36.4 billion in November, revised. “

You can find the report at http://www.bea.gov/newsreleases/international/trade/tradnewsrelease.htm

We can expect the deficit in our balance of trade to continue to grow as the economy recovers. Higher incomes mean higher purchases both from overseas and at home. As the rest of the world recovers it will purchase more from us too. But if experience is any guide our purchases from the rest of the world will grow more rapidly than its purchases from us.

As the deficit in our balance of trade increases we will borrow more heavily from overseas in order to finance those purchases. Buying more means borrowing more, and that's the price we will have to pay for economic expansion.

© 2010 Michael B. Lehmann