Friday, April 18, 2008

An insightful analysis

In a recent article published in Spiegel Online Gabor Steingart provides an incisive critique of current U.S. policies.

The dollar is in a tailspin, the trade deficit is growing and a recession is on the horizon. The American way of life is in serious danger. But the head of the Federal Reserve keeps on pumping easy credit into the system -- a crazy policy that will worsen the crisis. (,1518,547317,00.html)

There is lots of happy talk among advocates of free trade about how the fall of the dollar is making U.S. exports more competitive. For instance Robert Samuelson wrote in the Washington Post a couple of days ago that: "The overall trade deficit is dropping and, except for higher oil prices, would be dropping faster." (

Indeed the trade deficit was marginally lower in 2007 than in 2006. But the drop was small, and it isn't at all clear that it will continue. For instance, February's deficit of 62.3 billion was no cause for optimism. ( If the trade deficit continues at this pace, the deficit for the year will be about 740 billion dollars.

No comments: