U.S. Trade Deficit Shakes Consumer Confidence

[NNN0LHI]

http://www.newswise.com/articles/u-s-trade-deficit-shakes-consumer-confidence

Released: 9/2/2011 11:45 AM EDT
Source: Saint Joseph's University
Expert Available

Newswise — As the U.S. and European economies destabilize under the pressure of debt, the global economy is leaning heavily on China.

“Consumers — historically and especially during times of economic decline — value price over quality,” says Karen Hogan, Ph.D., professor of finance at Saint Joseph's University in Philadelphia. “China offers the U.S. and European economies cheap labor and affordable imports; we’re hooked on it.”

While conversation about the U.S. federal deficit dominates water cooler discussion, Hogan believes the U.S. trade deficit is an overlooked area of concern for consumers.

“According to global market theory, when a country increases the number of imports from another country, the cost of those imports should become more expensive due to an increase in the foreign currency value,” explains Hogan. The resulting value of the U.S. trade deficit should decline. This works to maintain stability in the world’s balance of payments.”

[FiveGoodMen]

1. Maybe it should, but I don't believe the average consumer is paying any attention to trade deficits

[NNN0LHI]

2. There is a cumulative factor that many don't think about until the party is over

http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm

<snip>An ongoing trade deficit is detrimental to the nation’s economy over the long term because it is financed with debt. In other words, the U.S. can buy more than it makes because the countries that it buys from are lending it the money. It is like a party where you’ve run out of money, but the pizza place is willing to keep sending you pizzas and put it on your tab. Of course, this can only go on as long as there are no other customers for the pizza, and the pizza place can afford to loan you the money. One day the lending countries may decide to ask the U.S. to repay the debt. On that day, the party is over.

[FiveGoodMen]

3. I don't disagree that it is the source of many problems.

But I think fear of losing one's job is the immediate reason for the lack of consumer confidence.

Yes, I know the deficit can lurk behind the bad job news.

My point is: Most Americans aren't watching the global situation that closely.

If you took a poll on what has Americans worried, I don't think the trade deficit is what most of them would mention.

[indepat]

4. And what a rude awakening it will be when that day comes and it will come just as surely as God

made little green apples in the summertime. We just don't know when that day is, but it gets a day closer every day. :thumbsup: :patriot: