The U.S. trade deficit has once again reached a record high.
To make a long story short, U.S. economists are claiming that this is a result of a rapidly growing and healthy domestic economy.
This is true. And I’m sure to most Americans, when they hear that we have a “rapidly growing and healthy economy”, they think that is a good thing.
While I’m no economics major, I tend to disagree.
It’s my opinion that our economy is being artificially propped up on credit. Not just in a national sense, but down to the individual level as well. The typical American family is a microcosm of our federal economic policy. Spending well beyond their means, purchasing things on credit, and barely making enough to pay the minimum due on their loans each month. Bankruptcies are skyrocketing. People are buried in debt.
So, they tell us that consumer spending is at a high. I believe that. Consumer spending may indeed be at a high. But is it sustainable? Where are Americans getting the money, when the trade deficit is so high? On one side, you have the largest amount of products ever being imported into the United States. On the other, you have so many more imports than exports. If we aren’t exporting anything, where are we getting our money?
We’re borrowing it.
But how can we ever pay it back, when our real income in this global economy is dwindling? We can only put in what we take back out. We can’t just invent money.
Or can we?
Individuals borrow from banks. The United States Government also borrows from banks. If an individual borrows so much from a bank that they can no longer sustain their repayments, their credit score falls, and banks are more hesitant to loan them money. It works the same way for countries.
Of course, nobody in their right mind has the balls to stop loaning us money as a country. Not right now. We’re too large in the world market right now. They invent money in a computer, and loan it to us. We in turn pump it back into the economy of rapidly developing nations like China.
Eventually, their domestic markets will be able to sustain their industry.
What will they need with us then?
