Does the American trade deficit threaten the world economic equilibrium?
In this presentation one will understand if the U.S. trade deficit is or not a threat to the global economic balance. In other words, it will show if the trade deficit in the U.S. has a negative impact or not on other economies in the world.
In January 2006, the U.S. trade deficit hit a record high of 68.59 billion, figures released on April 12 by the Commerce Department. The trade balance is measured as the difference between exports and imports. If imports exceed exports, the balance remaining is what is called as a trade deficit which means that a country buys more than it sells. This deficit which is high in the U.S is related to impulse consumption that involves massive imports of goods and also translates into a low savings rate by citizens.
Put simply, Americans buy a lot without having the means at all times. In principle, a trade deficit cannot continue indefinitely, because it would mean that at the end of a certain period the country will be bankrupt. That is what happened to Argentina, which went into one of the their worst crisis in 2000.
It is then clear to some that the United States can not remain in such a situation. The idea is wide spread in addition to being harmful to the United States, the U.S. trade deficit threatens international stability and is therefore unsustainable.
Given this fact, one comes to wonder what factors structuring the U.S. trade deficit, what are the negative consequences that flow from the global economy and how to fight against.
However, more recently, several studies have shown the risk of the absorption of the U.S. trade deficit for the global economic balance and declare the same for a "laissez-faire" with respect to it.
For many, the deficit is a threat. Considered a time bomb whose explosion that would occur if a crisis occurred in America, would be fatal for the world economy and balance. This paper will first show what the causes are for the deficit and then study what are the solutions proposed for the reverse.
There are several reasons the U.S. trade deficit:
The fact that Americans consume large quantities of foreign goods making imports important.
In fact, Americans consume more foreign products than foreigners consume American goods. This can be explained by a strong trading partner of the United States, the role of relocation, as well as demographic reasons (the younger generations tend to consume large quantities of imported goods). In addition, immigrant populations, which are many, consume goods from their country of origin.
Tags: Trade deficit; threat to world economic equilibrium; causes for American trade deficit