Dollar falls broadly on record US trade deficit

[AP]

http://biz.yahoo.com/rf/040813/markets_forex_trade_1.html
Friday August 13, 8:41 am ET

NEW YORK, Aug 13 (Reuters) - The dollar slumped across the board on Friday after a record U.S. trade deficit for June.

The euro (EUR=) rose to $1.2294 from $1.2220 shortly prior to the report. Against the yen (JPY=), the dollar pared gains to 111.03 yen from 111.70 yen shortly prior to the report.
...

The U.S. trade deficit came in much wider than expected in June, hitting a record $55.8 billion as the biggest drop in exports in nearly three years combined with record imports. Markets were expecting a trade gap of $47 billion in June.


This is just a couple of days after the Fed rate hike. Almost all the ground the dollar gained from the rate hike, it lost from this data.

It looks like currency traders are betting against the idea that the US economy is recovering.

Also, it's interesting that US exports are weak despite the fact that that the dollar has been pretty weak for the last 4 or 5 months. It doesn't look like there's a big demand for US goods, regardless of where they're priced. It suggests that the problem might not be price, but simply the fact that the US doesn't manufacture very much anymore. The tax code helps US Co's who manufacture abroad, and it looks like they're taking advantage of the breaks.

Consequently, nobody needs dollars to buy goods now. They might need dollars to buy US stocks and bonds, but it doesn't look like they're so interested in doing that either.

[swag]

1. Wow, two Fridays in a row, calamitous econo news for Bush

from Bloomberg"

``This poses some significant worries for the economic outlook,'' said Joseph Abate, a senior economist at Lehman Brothers Inc. in New York. ``Even if the trade balance improves to the low $50 billion range, it will remain a drag on growth of significant proportions as it suggests that demand is being met from foreign rather than domestic production and employment.''

http://quote.bloomberg.com/apps/news?pid=10000006&sid=avSFG.1GB6Lw&refer=home

Wharton's Jeremy J. Siegel seemed to have been stunned by the number in his weekly dispatch to subscribers.

[phantom power]

2. "stunned". Everybody is "stunned" when bad policy plays out

These people seem to have forgotten that consequences follow actions. Countries have credit-ratings just like individuals. What do they imagine the consequences are, for runaway deficit spending?

[BootinUp]

3. Oh stop...Bush knows what he's doing!

He's destroying the middle class of course.

[jmcgowanjm]

4. Doomed

The US can manipulate everything but crude.

$45.75/bbl crude.

http://www.321gold.com/editorials/russell/russell081204.html

[AndyTiedye]

5. It DOES Matter If they Hate us and Fear Us, Mr. Bush*!

Because then they won't BUY OUR STUFF, you idiot!!!

[AP]

6. We don't make anything for them to buy. We have to borrow rupees to

pay for the goods American companies are making in India now.

[NMDemDist2]

7. i wonder if it will go any good to start singing this as a talking point

will the average American understand it?

:cry:

[mbperrin]

9. Here's how I teach it in high school:

Anything which becomes less valuable in people's minds suffers a drop in value. For instance, "Tickle Me Elmo" was so hot at Christmas a few years ago that I had to pay $300 for one for my granddaughter (YOU tell a 5 year old No. I can't.) Well, it's still the same toy, but is way cheaper. Its hot moment is over.

Works the same way with money itself. In the past, people overseas desired dollars, because they wished to save or spend in this country, and we only take dollars.

But when government debt rises to where people become worried about repayment, and when items for sale no longer seem as good, or when the items for sale disappear, those people get rid of their dollars and buy another currency that looks better as a place to save and spend.

When the dollars are gotten rid of, the price must fall, because their value is lower to their owners. This means that when we ourselves want to buy things that are no longer made in this country, that our dollars buy less, or it takes more dollars to get the same stuff. Hence, the trade imbalance grows. Ironically, the more the imbalance grows, the more the perception of the dollar as a bad thing increases, leading the price to fall even more, and the trade deficit to increase even more.

That's brief, but I think fairly clear. I teach 18 year olds.

(edit for spelling)

[nolabels]

10. A lot of things could be attached to that explanation

Supply and demand works well on finite things, but as for innovation, the US is starting to lose the edge badly. The proverbial golden goose is being stifled with corporate greed and fascist or theocratic dogmas. Nobody has smashed anybodies will yet, so there is hope.

I would have never of dropped out of high school if I thought more than one or two teachers had clue of what was going on.

Keep up the good work :thumbsup:

A gainfully employed 45 year old truck mechanic

[V Lee]

8. Less desire for US goods

Re: "It doesn't look like there's a big demand for US goods, regardless of where they're priced. It suggests that the problem might not be price, but simply the fact that the US doesn't manufacture very much anymore."

With all the anti-American sentiment that the Bush administration has generated around the world, it is any wonder that few people outside the US want to buy US products?

No one seems to be talking about this but it will have a very real effect on our exports and trade deficit for years to come. I'd like to see a study to put a dollar estimate on it. Maybe international consumer focus groups on what "Made in USA" meant to them a few years ago vs. what it means now, and what impact it will have on their buying decisions.

[struggle4progress]

11. It's um another uh economic miracle! eom

[NYC]

12. Friend couldn't spend U.S. $ in Scandinavia.

Norway, Denmark, and Finland would not accept U.S. dollars. She just returned yesterday.

[aneerkoinos]

13. Huh?

FYI here in Finland we accept euro's. You friend should have taken his/her dollars to some forex service or bank to change them into euros, and not try to offer dollars at shops. ;)

Norway and Denmark are even wierder than Finland. :D

[JimHarper3]

14. And the bad news keeps coming

Trade deficit hitting a record $55.8 billion as the biggest drop in exports in nearly three years...
First net job loss since Herbert Hoover's adminstration...
Largest US budget deficit ever...
Enron, Global Crossing....

Any American who votes for this guy has to have their head in a bucket.

Many of them still seem to.

It is up to you and I to get their heads out of that bucket before November 2...and make sure they get to the voting booth.