Trade deficit has narrowed by more than any one can believe – the largest drop in four years – good news or bad news?
Fred Day
Nov. 5, 2006

Falling oil prices and stronger overseas demand for U.S.-made goods have narrowed the trade deficit by maximum in the last two years. Trade deficit in September narrowed by more than $5 billion – the largest drop in four years.

Drop in oil price has created the big difference. Looking at the details however, the outcome is more complex than it is apparent.

The oil price collapse worldwide is accompanied by lower demand and not just extra supply. The lower demand is bringing hoarded oil from the basement to the first floor. The glut is serious. But what does that tell you about the economy?

The debt driven economy needs to grow continuously in order to survive. The down turn that has started is explicit with lower oil price. In spite of lower trade deficit expectations, the dollar is trending lower while gold broke out on the upside again. It shows some serious trouble in coming days.

If the economy tanks, it will drag the world economy with it. That will not only balloon the Federal budget deficit, it will triple the trade deficit and worsen the balance of payments. The lower growth is worst for all. The underemployment finally will turn into deep unemployment.

Trade deficit has narrowed by more than any one can believe – the largest drop in four years – good news or bad news?
Fred Day
Falling oil prices and stronger overseas demand for U.S.-made goods have narrowed the trade deficit by maximum in the last two years. Trade deficit in September narrowed by more than $5 billion – the largest drop in four years.
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