I was poking at the CIA World Fact Book, which is a fascinating resource in itself, and noticed this table of “current account balance” by country. It’s a big table, so I won’t quote it here, but to understand my puzzlement, take a look at the top ten names, and then look at the bottom ten names…and then notice the magnitude of each balance. One of these kids is not like the other…
Is this something to be concerned about? Warren Buffet seems to think so.
For contrast, try out this table of GDP by country. This is closer to what I expected for the top 10 and bottom 10.
On a possibly related note, I was trying to import some Korean DRAM today, and it was stopped in customs, where I discovered that the US is charging a 40%(!) tariff on DRAM chips imported from certain Korean manufacturers. I guess this partially explains why the Idaho-based Micron seems to dominate the inventory in distributors in the US, and how they can charge a 2-3x price markup over what I can get overseas. Then again, it’s somewhat comforting to know that some of my DRAM comes from the same state that my french fries and potato chips do.
I guess the question is, would customers of finished products like the chumby pay extra just because it contains US-made DRAM.
I’m guessing not.
This is very disturbing indeed. I think it’s obvious that we’re not spending money in the right ways and I really wish people would pull their heads out of their arses and stop trying to force their differences of opinion on each other through legislation, get together and exchange ideas and realize the problems that plague all of us rather than letting our “democratically elected” officials squander all our money into fat company pockets in an inefficient and truly overcomplicated manner. A trackback to this seems imminent today (now you got the political gears turning, #$%^ you! :p).
-TheXenocide
Very sickening. Just more evidence that government works for the corporation, not the people.
This isn’t that shocking nor is it all bad. If this were a mercantile economy you might have cause for concern. The huge negative account balance indicates that we are able to source, domestically, the incredible wealth necessary to run that kind of trade imbalance. Additionally, our wealth source is neither drilled nor mined. It replenishes itself in an overly simplified world.
Purchasing power parity per capita is the only thing that matters. Look at the oil exporting nations that supply to the U.S. Sure their account balance is great, would you want to live there?
Also, I think the Chinese account balance might be deceptive. When a U.S. company builds something in China and ships it back to the U.S. market, I think that goes towards China’s account surplus. Anyone???
Interesting view on the situation. I talked to one of my friends the other day, and his opinion was summed up by this maxim: “If you owe the bank a small fortune, you’re in trouble. If you owe the bank a big fortune, the bank’s in trouble”. In other words, if you owe a debt that’s comparable to the bank’s assets, then if the bank tries to collect you can just declare default and the bank goes out of business–so the bank would rather offer more generous financing terms rather than collect and get nothing.
To back this up with numbers, the two biggest foreign holders of US debt is Japan (644 billion) and China (350 billion) (see http://www.treas.gov/tic/mfh.txt). Also, business in China is strong because of the relatively stronger US dollar (we’re incentivized to outsource there because labor is cheap), so China and Japan are sort of unable to collect on any debt that the US has been sending their way, because it would devalue the US currency and effectively reduce the perceived value of their T-bills.
It seems like a circular argument but I thought it was interesting nonetheless.
Of course, the biggest single holder of US national debt is the Social Insurance Trust Fund, followed by US citizens. I suppose a question then is, what happens when the baby boomers decide to collect on their debt?
I feel sadness for my unborn children.
I came across this article by Warren Buffet while searching for facts about the US national debt and trade imbalance, and it’s sobering. At least one expert seems to think it’s a problem.
What would happen where the US dollar was no longer the prized asset on world markets e.g. all currency trading was done in Euros. I understand Saddam and Iran used this “weapon” depending on which side of the fence you are. I also understand King Saud made an agreement with Roosevelt to trade oil in US $, in return US supports him.
Amjad-
The reason oil is traded in dollars, at least for now and in the past, is because the U.S. is the largest single consumer of oil in the world. It is also the number one export destination.
Additionally, The U.S. is the largest economy in the world. It is larger than all of Europe combined. If the U.S. currancy tanked and it maintained any semblence of its production and productivity capability it would go from the world largest importer to the worlds largest exporter. This would kill any foreign company selling into the U.S.
This is exactly what I expected to find out after reading the title huh?. Thanks for informative article
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