Good news on the Trade Deficit

The trade deficit continues to fall.  As I outlined in Part II of my economic series, moving to a trade balance is the easiest way to at least limit the overall indebtedness of the United States.  (The more painful way is debt destruction via deflation.)

If the massive fiscal deficits coming down the pike aren't offset by equal increases in private savings and/or Fed purchases, we risk undoing some of these gains in our trade position.  The good news about Obama's spending plans are that they focus on domestic spending (health care, education, alternative energy) and not on consumer spending which has a higher marginal propensity to import.  Not that I don't think alot of those stimulus dollars will be wasted, because I do.

A combination of suppressed consumer spending (caused by suppressed consumer borrowing), a shift toward a more domestically-oriented energy mix (which should include more nuclear power if we want to be realistic about it), less borrowing from abroad and more US savings directed abroad should help dig us out of our national balance sheet hole.

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