Posted by Michael Pento on 07/19/2011 at 7:01 PM
The U.S. trade deficit soared 15% month over month in May to $50.2 billion, which was the highest amount of red ink since October of 2008. Despite what some claim, we don’t have a diversified manufacturing base in this country and the percentage of our economy that is devoted to manufacturing has progressively slumped in the last 6 decades to the lowest level ever (11%). Year over year the trade gap widened 19% from the previous reading of $42.3 billion.
However, this data will not deter the economic geniuses to proclaim that a lower dollar can save the U.S. economy from hemorrhaging its wealth to foreigners. The fact is that the greenback has lost 12% of its value Y.O.Y. and the trade deficit has surged. That’s because the lower dollar increases the prices of everything sold in dollars. So foreigners can’t buy more of the stuff we make; but the lower dollar does make everything we still need to buy overseas more expensive. And the trade gap widens!
Is that a problem? Well, only if you care about selling away the future productive output of the economy with interest to people other than Americans or worry about the chronic weakness of the U.S. currency that could eventually lead to its total collapse.
Tags: debt , deficit , federal reserve , GDP