The US reported its trade deficit this morning. The annualized trade deficit is now running at $550 billion. You may remember that one of the reasons for a low interest rates and a declining currency was to spur exports. It seems exports are actually declining. WTF!!! How low does the USD need to go to spur exports? It looks like we are about to find out. The dollar declined after the report. It is now trading at its lowest level versus a basket of currencies since August 2008 during the worst financial crisis in history. It declined to 1.45 versus the Euro this morning. It has fallen 18% versus the Euro since June of 2010. Inch by inch, foot by foot, we get closer to the day of reckoning. It will happen without warning. A panic will ensue as everyone tries to exit the USD simultaneously. The picture won’t be pretty.
USD versus basket of currencies DXY
USD versus Euro
US Trade Deficit Deteriorates As US Import Price Index Surges By Most Since June 2009
Submitted by Tyler Durden on 04/12/2011 08:43 -0400
Another month, and another confirmation that the US export segment is non-existent. In February the US posted a $45.8 billion trade deficit compared to $47 billion in January, but worse than expectations of $44 billion. Importing our way to prosperity and #Winning_the_Future continues. Comparing the Chinese reported trade surplus with the US and the US reported trade deficit with China we get just a 100%+ difference: $7.8 billion versus $18.8 billion. Gotta love two administrations that just make up numbers trying to reconcile their fraud. This number also means that Q1 GDP will see another major revision lower. And so will Q2, Q3 and so forth, leading to QE3. And while we are at it, let’s just make it stagflation: the US import price index surged from 1.4% to 2.7% on expectations of 2.1%: the largest rise since June 2009.
From the report:
Goods and Services
- Exports decreased to $165.1 billion in February from $167.5 billion in January. Goods were $118.0 billion in February, down from $120.4 billion in January, and services were $47.2 billion in February, up from $47.1 billion in January.
- Imports decreased to $210.9 billion in February from $214.5 billion in January. Goods were $177.3 billion in February, down from $180.7 billion in January, and services were $33.6 billion in February, down from $33.8 billion in January.
- For goods, the deficit was $59.3 billion in February, down from $60.3 billion in January. For services, the surplus was $13.6 billion, up from $13.3 billion in January.
Goods by Category (Census basis)
- The January to February decrease in exports of goods reflected decreases in automotive vehicles, parts, and engines ($1.0 billion); industrial supplies and materials ($0.6 billion); other goods ($0.5 billion); capital goods ($0.3 billion); consumer goods ($0.2 billion); and foods, feeds, and beverages ($0.2 billion).
- The January to February decrease in imports of goods reflected decreases in automotive vehicles, parts and engines ($2.3 billion); capital goods ($2.1 billion); industrial supplies and materials ($1.4 billion); and other goods ($0.1 billion). Increases occurred in consumer goods ($2.3 billion) and foods, feeds, and beverages ($0.1 billion).
Services by Category
- Exports of services were virtually unchanged from January to February. An increase in other private services ($0.1 billion), which includes items such as business, professional, and technical services, insurance services, and financial services, was partly offset by a decrease in other transportation ($0.1 billion), which includes freight and port services. Changes in the other categories of services exports were small.
- The January to February decrease in imports of services was more than accounted for by decreases in other transportation ($0.2 billion) and travel ($0.1 billion). An increase in other private services ($0.1 billion) was partly offsetting. Changes in the other categories of services imports were small.
Goods by Geographic Area (Not Seasonally Adjusted)
- The goods deficit with China decreased from $23.3 billion in January to $18.8 billion in February. Exports increased $0.4 billion (primarily passenger cars, soybeans, and steelmaking materials) to $8.4 billion, while imports decreased $4.1 billion (primarily computers and accessories; toys, games, and sporting goods; and electric apparatus) to $27.3 billion.
- The goods deficit with the European Union increased from $5.6 billion in January to $6.9 billion in February. Exports decreased $0.3 billion (primarily nonmonetary gold; soybeans; and artwork, antiques and stamps) to $20.0 billion, while imports increased $1.1 billion (primarily pharmaceutical preparations, civilian aircraft, and household goods) to $26.9 billion.
- The goods deficit with the Japan increased from $5.0 billion in January to $5.2 billion in February. Exports increased $0.3 billion (primarily metallurgical grade coal; civilian aircraft, engines, equipment, and parts; and corn) to $5.3 billion, while imports increased $0.6 billion (primarily automotive parts and accessories, computer accessories, and motorcycles and parts) to $10.5 billion.
Yojimbo says:
Admin
Can you describe what the consequences will be if the dollar drops too low and people begin to exit the dollar? Some values will go up, some will go down. I would guess that different opinion writers have different beliefs about the consequences, much like some favor inflation and some favor deflation. What is the picture you see? Is this technically hyperinflation? And what is the estimated number where people start to flee the USD en masse? I think that nations have already begun to trade in currencies other than the USD, and are dumping USD for gold, etc…
Like or Dislike:
3 
0
12th April 2011 at 10:15 am
Administrator says:
Yojimbo
As the USD falls, everything we import goes up in price. Since we import $550 billion more than we export, inflation will go up as the USD falls. The USD is now below 75 versus the basket of worldwide currencies. The previous all-time low, just before the financial collapse in 2008 was 71.5. We are less than 5% away from that level. If that level is broken, traders and countries will likely panic out of the USD. Bernanke would have to increase interest rates dramatically to fend off the panic.
Either way, we’re fucked.
Well-loved. Like or Dislike:
7 
0
12th April 2011 at 10:24 am
Persnickety says:
Jim – your old company is making the news, offering great jobs to all those US workers who need them:
http://www.detnews.com/article/20110412/BIZ/104120384/1361/Ikea-s-U.S.-factory-churns-out-unhappy-workers
I especially like the comparison between the working conditions in Sweden vs. Virginia, and how IKEA seems to be viewing the US the way that we view Mexico.
Like or Dislike:
2 
0
12th April 2011 at 11:14 am
Administrator says:
Persnickety
I know for a fact that Swedes hate black people. I also know for a fact they hate unions. I also know for a fact, they are cheap bastards. Lastly, I know for a fact they couldn’t manage their way out of a paper bag.
Like or Dislike:
3 
0
12th April 2011 at 11:44 am
Colma Rising says:
I love the Swedes and they must love Black folk because Ikea revitalized Emeyville and East Palo Alto.
The only way I don’t vote for Obama, our genius and fiscally responsible leader, is if a Swede runs against him.
Ikea is an awesome retail chain.
Like or Dislike:
2 
0
12th April 2011 at 12:09 pm
TeresaE says:
Well thank gawd our dollar is falling (wasn’t that the plan?)
After all, with all our underwater houses and mortgages, a weak dollar will make them more affordable.
Oh wait,
oops.
Yep, FUBAR
Like or Dislike:
2 
0
12th April 2011 at 12:57 pm
Administrator says:
Colma
I was responsible for the budget in East Palo Alto. We paid off so many corrupt politicians in that shithole to get that store built it would make your head spin. We guaranteed the city we would employ a certain percentage of their dregs, then we reneged after the store opened. We couldn’t get some loser to sell us their property, so we built the store around his house. He wasn’t happy when his property taxes went up 500%. The project went $5 million overbudget. It was a lesson in how not to run a project.
Like or Dislike:
4 
0
12th April 2011 at 1:07 pm
Hope@ZeroKelvin says:
So a weak dollar causes all that ChiCom made crap in Walmart to be more expensive?
What ever will the People of Walmart do?
Like or Dislike:
2 
0
12th April 2011 at 1:08 pm
TeresaE says:
@Hope
Wish it were just Walmart.
I am hard pressed to spend my dollars on NON-foreign made crap in ANY store.
Once I discovered ALL Gerber baby food (and formula) and Kraft Mac’ N Cheese was foreign made, it opened my eyes.
And I’m oh-so-grateful that Ramen noodles are actually Made in the USA.
Like or Dislike:
2 
0
12th April 2011 at 1:24 pm
Administrator says:
“If a man does not have an ideal and try to live up to it, then he becomes a mean, base and sordid creature, no matter how successful…There is not in all America a more dangerous trait than the deification of mere smartness unaccompanied by any sense of moral responsibility.”
Theodore Roosevelt
Like or Dislike:
0 
0
12th April 2011 at 1:44 pm
Persnickety says:
You make IKEA sound like Mallwart with a Svedish accent!
Like or Dislike:
1 
0
12th April 2011 at 1:48 pm
Colma Rising says:
Admin: That’s frickin hilarious. Truthfully, though it’s closer, I never go to Ikea EPA.
The cheaper dollar will do so little for exports and does nothing but make my chips and beer expensive.
Free trade my ass. Instead of a supposed “free flow” of goods, services and capital, the picture is better described as an air compressor and the US isn’t the tank.
When will the Free Traitors realize this? This so-called “benefit” to a third-world dollar is the biggest farce I’ve heard from my Keynesian professors and fat-headed radio talk jocks.
The graphs in this post underscore my position.
I want deflation. I want low prices. I want my earnings to appreciate. I want housing to be affordable. I DO NOT want $4.25 a gallon gas squeezing my employer’s margins so I have no hope for a raise or any piece of the action.
The Keynesian “grow the pie” crowd has their heads stuffed up their ass. Their policies have taken a hearty pie and turned it into a cream pie. They STILL don’t get it and the only way I can keep my GPA high is to learn this crap.
I’m not a Keynesian but have to play one on tv.
Like or Dislike:
2 
0
12th April 2011 at 1:55 pm
bigargon says:
think the main reason we still have export deficits is what the hell do me make anymore?
Crap low MPG SUV’s and weapons. so unless we can sell the world Lincoln navigators and M4 carbines were screwed.
of course we can always “export” our T-bills we got plenty of those
Like or Dislike:
2 
0
12th April 2011 at 5:22 pm
ASIG says:
What happens when the USD is no longer the world’s reserve currency?
One could write a book to answer that question but the short answer is that the cost of living will drastically increase and the standard of living in the US will plummet.
Like or Dislike:
0 
0
12th April 2011 at 9:11 pm
eugend66 says:
Anyone here heard the rumor about Saudi Arabia canceling a 60 bln worth of US
weaponry (fighter planes)? Maybe the price tag went up due to rising raw mat costs or those
supplying the US military demand higher prices?
Like or Dislike:
0 
0
12th April 2011 at 5:21 am
Welshman says:
Eugend,
If that is true about cancelling the fighter contract, you should write the diaper heads at the Saudi Embassy. Tell them we will stop buying their oil, that should scare the shit out of them.
Like or Dislike:
0 
0
12th April 2011 at 10:48 am