USA Trade Deficit

Well, the latest numbers for the trade deficit are out, and they paint an increasingly gloomy picture of what's happening in the world and in the country in general:
Yahoo Article re: Trade Deficit

It is simply impossible for the USA to continue borrowing money indefinitely to finance the trade deficit. At some point, the free money is going to quit flowing, and it will be time to begin paying it back. When this happens, the reckoning is going to be terrible. It's absolutely imperative that the trade deficit be reversed to at least zero on an average.

How can this be done?

Well, for starters, the savings rate in the United States needs to increase. Part of the reason for the massive trade deficit is simply that we Americans keep spending all of our income instead of saving some of it.

So, the tip for today about how to improve (in this case, to guard) Enlightenment Civilization might seem a bit strange. It is to put a bit of money aside in savings. Pick something that you absolutely, positively would have spent money on, and skip it this time around. Put the savings, no matter how small, into whatever bank or investment account you have available. It's absolutely going to be a drop in the bucket, there's no question. In fact, it will just be a drop in the ocean. But every little bit counts. Every journey begins with the first step.

It's a matter of world stability that the USA must reduce its trade deficit. There are two ways to do it: reduce spending on foreign goods and save more. Heck, just gather up your spare change that's lying around and put it in the bank.

Getting a little more specific about the trade deficit, here's one viewpoint that minimizes the importance of the deficit:
Progressive Policy Institute Article on Trade Deficit

There's good reason to think that the trade deficit is less of a concern than many people believe. To a large degree, deficits across currencies have a self-correcting mechanism because the value of the currencies change. As long as we're borrowing in dollar-denominated loans, changing currency values will adjust the situation to a certain degree. As foreigners hold more dollars, the value of the dollar lowers. As the value of the dollar lowers, we sell more goods abroad and the deficit shrinks. For this reason, the trade deficit can't be compared exactly to a person who keeps going to the bank and borrowing against his income.

Moreover, the solution to the deficit is definitely not a dramatic increase in trade tarriffs (although there may be other reasons to implement trade barriers of some kind). But increasing our savings rate is a win-win proposition all around. Put some money aside today.