# Do trade deficits matter?



## phoenixrising (17 May 2006)

With the popular beleif that the US dollar will tank, I thought a bit of balance to the argument could be justified. I have been bearish but I'm contrarian also

This was prompted by an article from John Maudlin @ http://www.frontlinethoughts.com (newsletters)

To long to post, can be read there. I'll summarise the main points

The US trade deficit @ $800 billion is 7% of $12 trillon GDP. Simple maths says 15 yrs to 100% in hock.

But US assets (private sector) is $52 trillion net and $64 trillion gross, with $12 trillion liabilities. Therefore 7% GDP equals 1.2% of US assets.

The $2.5 trillion net foreign debt is a scarey 20% of national income, but 4% of net worth.

Wealth has been growing at 5-6% since 1955, equals $3 trillion a yr. So could borrow indefinately & never owe > 26%. At this rate by 2045 debt to asset is $100 to $500 trillion borrowed from a world economy of 5-8 times as much

He then quoates a corporation borrowing money. A similar example would be borrowing for a house. Say ave $50k worker borrows $200k for a $250k house the repayments are scarey but compared to the asset small & should continue to appreciate over time (or now in W.A.)

Anyway food for thought, this may set the cat amongst the pidgeons for the $US bears.


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## Milk Man (17 May 2006)

Not only the domestic but govt debt to factor in. Any more better informed opinions? (WayneL)​


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## MARKETWAVES (18 May 2006)

What about  the Us Space  program ?

How can anyone talk about the deficit and not put the space program in  perspective?

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Untold Billions are being spent there.............

Where  does  that  money come  from? .........
(Dont  insult your intelligence  and  say  taxes)

How come no one complains about that funding? .................

It always seems to be there .........

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And  for  what ,  we  have enough  problems down  here.
We willl just pollute  space with every thing we  have  polluted down  here  with anyway, thats where we are headed.


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