Re: Will record trade deficits...

On 13 Apr 2005 17:19:32 -0700, xyzer@xxxxxxxxxxx wrote:

>
>Brablo wrote:
>> be a concern?
>>
>> how is this correlated with the budget deficits (if any)?
>
>Budget deficits happen when tbe government's expenditures are going to
>be higher than the year's tax revenues. In general, trade deficits
>happen for a particular region when the people of that region buy more
>goods from other regions than they sell to those other regions. I
>don't see why the two would have a high correlation.

It's simple and factual. Budget deficits force up domestic interest
rates, causing the dollar to appreciate relative to other currencies,
the stonger demand for US dollars and the appreciating value of the
dollar makes US goods more expensive and foreign goods cheaper, a
rising trade deficit.

There's a transmission mechanism from rising budget deficits to rising
trade deficits.
.