Home > Economics - General > The Unsustainability of Trade Deficits

The Unsustainability of Trade Deficits

November 22nd, 2005

I’ll be talking on this topic to the Economic Society of Australia (Queensland branch) on Thursday night at the Exhange Hotel, a well-known Brisbane cultural centre. I’m preparing a presentation and I found this graph of the US trade balance at the St Louis Fed

Bopbgs Max

The graph is in billions of dollars per quarter, unadjusted for inflation, so the pattern is exaggerated. Still it’s a good illustration of how the recent massive deficits are historically unprecedented, something which is true even when the more appropriate measure of percent of national income is used.

Australia’s experience is less dramatic, but we are, nonetheless hitting new records in terms of deficits and debts.

fn1. No animals were harmed in the preparation of this talk.

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  1. Graeme Bird says:
    January 29th, 2006 at 03:28 | #1

    Countries with high savings rates tend to run a surplus balance of trade. This is a phenomenon entirely independent of the countries wage rates.

    Just recently it has been suggested that we remove the 15% surcharge from pre-tax superannuation contributions. This would be very helpful in improving our trade balance. But a lot of other things could be done as well.

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