Our Huge Balance of Trade Problem

China is a big trade partner with the US. China has also been a source of borrowing for the US to help pay for its deficit spending. In fact, the US owes China over $1.2 trillion.

The US has incurred a trade deficit with China every year since 1984. Doesn’t it seem like almost everything we buy is made in China? Most of the stuff we buy from them is perishable. The US dollars we give them are not! This continued trade imbalance combined with the debt interest payments to China is a lethal combination that puts us at a competitive disadvantage with them and represents a long term threat to our economy.

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Our trade deficits are not only with China but other countries as well. Take a look at our total world trade imbalances resulting in deficits of over $700 billion a year.

Over time, the rest of the world will end up with all our dollars and we end with perishable stuff. Under this scenario we will need to print more dollars to buy more stuff. Flooding the world with US dollars will cause the value of the dollar to decline significantly causing hyper inflation.

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This scenario can be avoided if the US can improve its balance of trade. The solution is to significantly increase our manufacturing and exporting capacity (e.g. the “Made in America” theme) so that we make what we consume here in the States, and decrease our dependence on imports. Also, we have a golden opportunity to use our abundant oil and gas reserves with which to barter. Let’s hope Congress can help support these initiatives and get US workers back to work and off the government doles.