For at least a decade the US consumer kept the rest of the world gainfully employed. She borrowed and spent on an historically unprecedented scale. The external deficit was where this huge spendfest showed up. During 2007, the US balance of goods and services was in the red by about $60 billion a month.It ultimately proved to be an unsustainable level of consumption. Since the Lehman bankruptcy, US consumers have suddenly cut back on imports. In February, the external defict was just $25 billion. Since August last year, the monthly deficit has fallen by $35 billion. If this trend continues, then by mid-summer, the US balance of goods and services will reach zero.
China is most immediate victim of this sudden contraction in US import demand. From their peak in October last year, Chinese exports to the US are down 44 percent.
The UK hasn't escaped. Our exports across the atlantic are down 16 percent. Not that we exported that much to the US; for every one dollar of exports we sent westwards, the Chinese sent eastward $5.86
4 comments:
Excellent post. Your charts are superb. Keep on blogging!
That must be the fastest current account correction in history.
Sending stuff westwards is a peculiarly expensive way to export from China to the USA.
You could think of the troubles of the US as going back to before WWI. The outcome of the first set of troubles was the setting up of the Fed, the Florida land boom, the Wall St Crash, the Great Depression, the "American Default" on bonds, and so on.
The second set of troubles leads to the abandonment of the tie to gold, the inflation of the 70s, the bubbles in shares and property of the 90s and 00s, and the current predicament.
Put that way, the sequence of troubles began when the US ran out of Red Indian land to steal.
Post a Comment