Current account deficit of the US in 2005

[KrazyHorse]

The services sector is not uniform, Dan

There are the parts that are almost perfectly shippable (intellectual property)

There are the parts that are shippable with a bit more hassle (call centers)

There are the parts that I don't understand how you will ship (girl at the cash register)

That third section is by FAR the largest piece. The second section often involves knowing another language, and given the low-level nature of most of these jobs they flow to the lowest common denominator. Which is why you see Indians servicing Americans and not the other way around. The first section is already heavily dominated by the US.

WHERE IS THE ENORMOUS GROWTH YOU NEED GOING TO COME FROM?

[Dinner]

Originally posted by KrazyHorse
I think that manufacturing is special in a trade context because it's easier to ship 1.4 trillion dollars of manufactured goods every year than it is to ship 1.4 trillion dollars of services every year. The service economy is largely confined to same-country activity. The parts that are not (intellectual property being one of the largest pieces) are much, much, much smaller pieces of the economy than are plain and simple manufactured goods.

To be fair the service jobs you can ship are exactly the high paying service jobs we're relying on to replace those lost manufacturing jobs. Biotech, engineering, software, accounting, and a bunch of other stuff. True, a waitor's job can't be outsourced nor can a store clerk or even a few high paying service jobs which are site specific like doctors or geologists (or other scientists which actually have to work on site) but the majority of those service jobs are low paying. If we lose the high paying service jobs then we won't have much left to replace the loss of high paying manufacturing jobs.

[Velociryx]

MOST excellent! Another thread predicting the imminent doom of the US Economy.

*grabs popcorn*

-=Vel=-

[KrazyHorse]

To be fair the service jobs you can ship are exactly the high paying service jobs we're relying on to replace those lost manufacturing jobs. Biotech, engineering, software, accounting, and a bunch of other stuff.

That's fine, and as far as that goes it's a definite beneficial trade-off

But there's only so much of the global economy which lies in these high-paying high-skilled service sectors. To be sure, this proportion is growing, but it's not growing at the rate of 20% per annum. That's why I'm saying that global trade in services cannot match global trade in goods for many, many years to come. A current account deficit of 6.4% of GDP will not wait that long. It will find its own solution in the next 10 years at most.

[KrazyHorse]

Originally posted by Velociryx
MOST excellent! Another thread predicting the imminent doom of the US Economy.

Not at all. I don't think that Americans are going to be scrabbling in the dirt at any point in the foreseeable future. I do think, however, that much of the current growth in the US economy is based around an unsustainable sale of assets. This will be corrected, and will provide a significant drag on growth in the long term.

[KrazyHorse]

But you're welcome to actually contribute something, if you have anything to contribute.

How do you think that the gap in the current account balance of the US will be resolved?

[DanS]

I agree with your post to me, above. I don't know how we're going to ship the girl at the cash register, but there may be ways in the future well short of temporary teleportation.

I'll try to take this stuff in pieces.

First thing to note is that the US buys a good deal of its oil from abroad. The price of oil isn't going to be at $60 forever. I think it would be proper to remove at least $50 billion from the deficit as temporary.

The next thing to note is that US manufacturing productivity has exploded since 2002.

6.6% in 2002
5.6% in 2003
5.5% in 2004
5.0% in 2005

By one measure, manufacturing represents some 13% of our economy, so over the long-term, productivity could have a sizeable impact on our goods production versus the overall portion of our economy that goes to buying goods (a declining proportion). I agree that in the short term, if there is a large shock, this will not give us the boost that we need.

If there is a shock in the short term, then we would have to buy less useless **** abroad.

[Dinner]

Worse or better then Japan after the bubble burst?

I'm not seeing an Argentine style debt crisis though if the dollar really falls and foreigners dump their dollor dominated assets then exactly how bad will it be? Financial markets will scream, inflation will go up in a fairly significant way, likely we'll see a recession but I'm not seeing a depression like some people on other sites have predicted. Japan's decade long problem was mostly because the Japanese government never took decisive action to end the situation and instead just took a series of half measures and hoped they'd be enough. I don't see that happening.

I do see the government finally having to decrease it's spending because the trade deficit causes the dollar to go sharply downward and puts the country into recession. That would be bad since cutting spending would only worsen the recession but it has to happen sometime and the Republicans have seriously put us into debt.

[Ecthy]

Originally posted by KrazyHorse
Current account deficit has nothing to do with government spending, except insofar as government spending counts as much as does private spending. The US federal budget deficit measures inflow and outflow from the US federal government. The CAB measures the flow of money into and out of the US as a whole. It is comprised of 3 components:

Trade balance: the value of goods and services you export minus the value of goods and services you import

Net returns on investment: the value of returns to your residents on foreign investment minus the value of returns paid to foreigners on their investments in your country

Unilateral currency transfers: monetary gifts to your residents from foreigners and foreign aid received by you minus gifts given to foreigners by your residents and foreign aid donated by you

Thanks. I had no clue what this thread was about until this. Leistungsbilanzdefizit!

Gesamtbilanzdefizit?

[loinburger]

Originally posted by Ecthy
Leistungsbilanzdefizit!
Gesamtbilanzdefizit?

Schadenfreude!!!

Not really, that's just the only German word I know besides wienerschitzel and saurkraut.

[KrazyHorse]

Originally posted by DanS
I agree with your post to me, above. I don't know how we're going to ship the girl at the cash register, but there may be ways in the future well short of temporary teleportation.

I'll try to take this stuff in pieces.

First thing to note is that the US buys a good deal of its oil from abroad. The price of oil isn't going to be at $60 forever. I think it would be proper to remove at least $50 billion from the deficit as temporary.

The next thing to note is that US manufacturing productivity has exploded since 2002.

6.6% in 2002
5.6% in 2003
5.5% in 2004
5.0% in 2005

By one measure, manufacturing represents some 13% of our economy, so over the long-term, productivity could have a sizeable impact on our goods production versus the overall portion of our economy that goes to buying goods.

Errr...so basically you're agreeing that the US lost too many manufacturing jobs too quickly?

[DanS]

I cross-edited you with some goodies.

[KrazyHorse]

Originally posted by Oerdin
Worse or better then Japan after the bubble burst?

I don't know. Similar, maybe? This is the part of economics which is voodoo. I can tell you what needs to happen. I don't know how bad it's going to be to get there. The Japanese situation was made worse by the structure of the Japanese economy, which was overly rigid. If it happened now, the correction might cause 3 years of negligible growth. If it happens in ten years the pain might go on for a decade.

Certainly nothing ridiculous like Argentina.

[KrazyHorse]

Hurry up and fix this. It's easier for us to ship **** to you than it is to ship it to Europe and China...

[Velociryx]

I think that the main advantage for publishing long-winded papers on the topic and debating it ad nauseum would normally be a good scare tactic, overshadowed by the sitting administration's "terror alerts."

Still, it provides good fodder to keep some highly paid members of the Service Sector of the economy gainfully employed, and busily tapping at the keys, so that's something.

Aside from that, about all that can be said is that globalization is new, uncharted territory, and no one can predict with any reliability what will happen, much less when. Economists have a track record that's WAY worse than weathermen, and they are usually credited with vastly more vivid imaginations, to boot.

-=Vel=-